Market Newsdesk

August 3, 2021 6:43 am

Jacobs Reports Fiscal Third Quarter Earnings

Increasing Full-Year Fiscal 2021 Outlook; Reflecting Continued Strong Year-to Date Results

PA Consulting Q3 Revenue Up 36% Year-Over-Year; Increasing FY21 Expected Accretion

Strong Cash Flow to Further Enable Value-Creating Capital Deployment

Accelerating Decarbonization and Energy Transition Opportunities Stemming from Climate Change

Launched “Reimagined Perspectives” Thought Leadership to Drive ESG Solutions

Wins Strategic Counterintelligence Analytics Contract with Army INSCOM

PR Newswire

DALLAS, Aug. 3, 2021 /PRNewswire/ — Jacobs Engineering Group Inc. (NYSE: J) today announced its financial results for the fiscal third quarter ended July 2, 2021.

Q3 2021 Highlights:

Revenue of $3.6 billion¹ grew 9.7% year-over-year and net revenue up 10.6% year-over-year
EPS from continuing operations of $0.82, impacted by $(0.44) related to an updated non-cash valuation allocation between PA Consulting preferred and common shares, with no impact to the original consideration²
Adjusted EPS from continuing operations of $1.64
Backlog increased $1.8 billion to $25.4 billion, up 7% year-over-year
Cash flow from operations of $173 million; expecting to exceed FY21 cash conversion target
Increases fiscal 2021 adjusted EBITDA and adjusted EPS outlook³

Jacobs’ Chair and CEO Steve Demetriou commented, “We believe we are entering an attractive growth period for Jacobs, driven by strong global trends in infrastructure modernization, energy transition, national security and a potential super-cycle in global supply chain investments. We see these opportunities leading to an increasing and robust sales pipeline developing in FY22 and into FY23.” Demetriou continued, “We are confident that our strong culture, deep domain knowledge and investments in the latest enabled solutions have positioned us as the leader in helping our clients solve these complex global challenges.”

Jacobs’ President and CFO Kevin Berryman added, “Our people continue to execute against our strategic and financial goals, leading to another quarter of strong results across our lines of business with PA Consulting continuing to outperform our initial expectations. Cash flow from operations was robust as we maintained our focus on efficient use of working capital. This disciplined execution throughout the fiscal year has again resulted in our ability to raise our full-year outlook. Looking into fiscal 2022 we are well-positioned to achieve double-digit adjusted EBITDA growth³, driven by our alignment to long-term secular trends.”

Financial Outlook

The company now expects fiscal 2021 adjusted EBITDA of $1,210 million to $1,275 million and adjusted EPS of $6.15 to $6.35 from its previous outlook of adjusted EBITDA of $1,200 million to $1,270 million and adjusted EPS of $6.00 to $6.30.³

The company is also increasing the expected adjusted EPS net accretion from PA Consulting to $0.35 to $0.37 from $0.32 to $0.34; net of 35% non-controlling interest and incremental interest costs required to fund the company’s investment consideration.³

²

PA Consulting

The company closed its strategic investment in PA Consulting on March 2, 2021. Per U.S. GAAP, $267 million (pre-tax and before non-controlling interest portion) of the estimated aggregate consideration for PA Consulting was required to be treated as post-completion compensation expense in the second fiscal quarter 2021 given retention related requirements applicable to the distribution of such funds to PA Consulting employees. This $267 million impact relative to the announced investment consideration was reflected in Q2 GAAP SG&A and excluded from adjusted results. The total consideration for PA Consulting remained consistent at 1.4 billion pounds.

Of the total price consideration, $261 million in final consideration amounts (net of forfeitures during the quarter) has been reflected in fiscal third quarter cash flows from operations as the net payment given the compensation accounting treatment noted above.

Additionally, the fiscal third quarter earnings per share reflect $(57.3) million or $(0.44) related to an updated non-cash valuation allocation between PA Consulting preferred and common shares, with no impact to the original consideration.

See quarterly report on Form 10-Q for discussion of accounting implications of the PA Consulting transaction.

¹Reflects continuing operations as reported in accordance with GAAP.
³Reconciliation of the adjusted EPS outlook and adjusted EBITDA outlook for the full fiscal 2021 year and fiscal 2022 to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation, including with respect to the costs and charges relating to transaction expenses, restructuring and integration to be incurred in fiscal 2021 and 2022.

Third Quarter Review

	Fiscal Q3 2021	Fiscal Q3 2020	Change
Revenue	$3.6 billion	$3.3 billion	$0.3 billion
Net Revenue	$3.0 billion	$2.7 billion	$0.3 billion
GAAP Net Earnings from Continuing Operations	$165 million	$227 million	($62 million)
GAAP Earnings Per Diluted Share (EPS) from Continuing Operations	$0.82	$1.73	($0.91)
Adjusted Net Earnings from Continuing Operations	$216 million	$165 million	$51 million
Adjusted EPS from Continuing Operations	$1.64	$1.26	$0.38

The company’s adjusted net earnings from continuing operations and adjusted EPS from continuing operations for the third quarter of fiscal 2021 and fiscal 2020 exclude the adjustments set forth in the table below. For additional information regarding these adjustments and a reconciliation of adjusted net earnings and adjusted EPS to net earnings and EPS, respectively, as well as a reconciliation of net revenue to revenue, refer to the section entitled “Non-GAAP Financial Measures” at the end of this release.

	Fiscal Q3 2021	Fiscal Q3 2020
GAAP Net Earnings from Continuing Operations and Diluted Earnings Per Share (EPS)	$165 million ($0.82 per share)	$227 million ($1.73 per share)
An adjustment to add back after-tax restructuring, transaction costs and other charges ($7.6 million and $20.5 million for the fiscal 2021 and 2020 periods, respectively before income taxes). Also includes $(57.3) million, or $(0.44) per share, in EPS numerator adjustments relating to PA preference shares redemption value, which does not affect net earnings.	$4 million ($0.47 per share)	$14 million ($0.11 per share)
Other adjustments are comprised mainly of: (a) add-back of amortization of intangible assets of $49.6 million and $23.1 million in the 2021 and 2020 periods, respectively, (b) the reclassification of revenues under the Company’s Transition Services Agreement (TSA) with Worley of $1.0 million in fiscal 2020, (c) the removal of $38.7 million and $123.1 million in fair value adjustments related to our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale in the 2021 and 2020 periods, respectively, (d) the removal of the fair value adjustment for the Company’s investment in C3.ai, Inc. (“C3”) of $1.0 million in the 2021 period, (e) the removal of $30.8 million in additional income tax expense attributable to tax rate increases in the UK during in 2021, (f) associated noncontrolling interest impacts for the above adjustment items and (g) income tax expense adjustments for the above pre-tax adjustment items.	$46 million ($0.35 per share)	$(76) million ($(0.58) per share)
Adjusted Net Earnings from Continuing Operations and Adjusted EPS from Continuing Operations	$216 million ($1.64 per share)	$165 million ($1.26 per share)
(note: earnings per share amounts may not add due to rounding)

The Company’s U.S. GAAP effective tax rate for continuing operations is 38.5% for the fiscal third quarter 2021 and includes a $30.8 million impact from an increase in UK statutory income tax rates during the period. Fiscal third quarter 2021 adjusted earnings per share from continuing operations reflects a 20% adjusted effective tax rate to adjust for a change in the company’s estimated annual adjusted effective tax rate to 22.5% from 23.8%. The change in estimated tax rate resulted in an 8 cents per share tax benefit during the third quarter.

Jacobs is hosting a conference call at 10:00 A.M. ET on Tuesday August 3, 2021, which it is webcasting live at www.jacobs.com.

About Jacobs
At Jacobs, we’re challenging today to reinvent tomorrow by solving the world’s most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing, turning abstract ideas into realities that transform the world for good. With $14 billion in annual revenue and a talent force of approximately 55,000, Jacobs provides a full spectrum of professional services including consulting, technical, scientific and project delivery for the government and private sectors. Visit jacobs.com and connect with Jacobs on LinkedIn, Twitter, Facebook and Instagram.

Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Statements made in this press release that are not based on historical fact are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding our expectations as to our future growth, prospects, financial outlook and business strategy for fiscal 2021 or future fiscal years and statements regarding our expectations as to accretion from our PA Consulting investment and the anticipated benefits of that strategic investment, which are based, in part, on estimates and assumptions regarding the potential continued effects of the COVID-19 pandemic on our business, financial condition and results of operations. Although such statements are based on management’s current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially. We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements. Such factors include the magnitude, timing, duration and ultimate impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and any resulting economic downturn on our results, prospects and opportunities, the timeline for easing or removing “shelter-in-place”, “stay-at-home”, social distancing, travel restrictions and similar orders, measures or restrictions imposed by governments and health officials in response to the pandemic, or if such orders, measures or restrictions are re-imposed after being lifted or eased, including as a result of increases in cases of COVID-19; the development, effectiveness and distribution of vaccines or treatments for COVID-19; the timing and scope of any government stimulus programs enacted in response to the impacts of the COVID-19 pandemic, including, but not limited to, any proposed infrastructure-related stimulus programs; and the impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities; the inability of our clients to meet their payment obligations in a timely manner or at all; potential issues and risks related to a significant portion of our employees working remotely; illness, travel restrictions and other workforce disruptions that could negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects; difficulties associated with hiring additional employees or replacing any furloughed employees; increased volatility in the capital markets that may affect our ability to access sources of liquidity on acceptable pricing or borrowing terms or at all; and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein. The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control. For a description of these and additional factors that may occur that could cause actual results to differ from our forward-looking statements see our Annual Report on Form 10-K for the year ended October 2, 2020, and in particular the discussions contained therein under Item 1 – Business; Item 1A – Risk Factors; Item 3 – Legal Proceedings; and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, and our Quarterly Report on Form 10-Q for the quarter ended July 2, 2021, and in particular the discussions contained under Part I, Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations; Part II, Item 1 – Legal Proceedings; and Part II, Item 1A – Risk Factors, as well as the Company’s other filings with the Securities and Exchange Commission. The Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform to actual results, except as required by applicable law.

Financial Highlights:

*Results of Operations (in thousands, except per-share data):*

	For the Three Months Ended				For the Nine Months Ended
Unaudited	July 2, 2021		June 26, 2020		July 2, 2021		June 26, 2020
Revenues	$	3,576,436	$	3,260,057	$	10,506,144	$	10,047,286
Direct cost of contracts	(2,759,501)		(2,631,031)		(8,290,137)		(8,125,554)
Gross profit	816,935		629,026		2,216,007		1,921,732
Selling, general and administrative expenses	(553,189)		(434,650)		(1,779,435)		(1,408,232)
Operating Profit	263,746		194,376		436,572		513,500
Other Income (Expense):
Interest income	1,001		1,249		2,733		3,180
Interest expense	(20,011)		(18,193)		(52,788)		(48,163)
Miscellaneous income (expense), net	38,658		126,249		138,705		(87,470)
Total other income (expense), net	19,648		109,305		88,650		(132,453)
Earnings from Continuing Operations Before Taxes	283,394		303,681		525,222		381,047
Income Tax Expense from Continuing Operations	(109,186)		(67,674)		(175,437)		(75,041)
Net Earnings of the Group from Continuing Operations	174,208		236,007		349,785		306,006
Net Earnings of the Group from Discontinued Operations	384		18,043		11,690		125,511
Net Earnings of the Group	174,592		254,050		361,475		431,517
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(9,182)		(9,121)		(29,366)		(21,662)
Net Loss Attributable to Redeemable Noncontrolling interests	384		—		101,776		—
Net Earnings Attributable to Jacobs from Continuing Operations	165,410		226,886		422,195		284,344
Net Earnings Attributable to Jacobs	$	165,794	$	244,929	$	433,885	$	409,855
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$	0.83	$	1.74	$	2.80	$	2.15
Basic Net Earnings from Discontinued Operations Per Share	$	—	$	0.14	$	0.09	$	0.95
Basic Earnings Per Share	$	0.83	$	1.88	$	2.89	$	3.11

Diluted Net Earnings from Continuing Operations Per Share	$	0.82	$	1.73	$	2.78	$	2.13
Diluted Net Earnings from Discontinued Operations Per Share	$	—	$	0.14	$	0.09	$	0.94
Diluted Earnings Per Share	$	0.83	$	1.87	$	2.87	$	3.08

*Segment Information (in thousands):*

	Three Months Ended				Nine Months Ended
Unaudited	July 2, 2021		June 26, 2020		July 2, 2021		June 26, 2020
Revenues from External Customers:
Critical Mission Solutions	$	1,218,089	$	1,211,143	$	3,822,949	$	3,636,978
People & Places Solutions	2,102,550		2,048,914		6,329,088		6,410,308
Pass Through Revenue	(612,045)		(578,717)		(1,837,350)		(1,921,863)
People & Places Solutions Net Revenue	$	1,490,505	$	1,470,197	$	4,491,738	$	4,488,445
PA Consulting	$	255,797	$	—	$	354,107	$	—
Total Revenue	$	3,576,436	$	3,260,057	$	10,506,144	$	10,047,286
Net Revenue	$	2,964,391	$	2,681,340	$	8,668,794	$	8,125,423

	Three Months Ended				Nine Months Ended
	July 2, 2021		June 26, 2020		July 2, 2021		June 26, 2020
Segment Operating Profit:
Critical Mission Solutions	$	108,131	$	89,608	$	332,133	$	264,323
People & Places Solutions	205,324		190,453		603,654		557,864
PA Consulting	56,791		—		84,708		—
Total Segment Operating Profit	370,246		280,061		1,020,495		822,187
Other Corporate Expenses (1)	(104,532)		(65,213)		(238,198)		(193,148)
Restructuring, Transaction and Other Charges (2)	(1,968)		(20,472)		(345,725)		(115,539)
Total U.S. GAAP Operating Profit	263,746		194,376		436,572		513,500
Total Other Income (Expense), net (3)	19,648		109,305		88,650		(132,453)
Earnings from Continuing Operations Before Taxes	$	283,394	$	303,681	$	525,222	$	381,047


(1)	Other corporate expenses also include intangibles amortization of $49.6 million and $23.1 million for the three months ended July 2, 2021 and June 26, 2020, respectively, and $103.3 million and $67.1 million for the nine months ended July 2, 2021 and June 26, 2020, respectively.
(2)	Included in the three and nine months ended July 2, 2021 are $(2.8) million and $297.4 million, respectively, of costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs.
(3)	The three and nine months ended July 2, 2021 include $38.7 million and $102.2 million, respectively, in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, $1.0 million and $49.6 million, respectively, in fair value adjustments related to our investment in C3 stock. The nine months ended July 2, 2021 also includes $(38.9) million related to impairment of our AWE Management Ltd. investment. The three and nine months ended June 26, 2020 include revenues under the Company’s TSA with Worley of $1.0 million and $15.2 million, respectively, and $123.1 million and $(119.0) million, respectively, in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale.

*Balance Sheet (in thousands):*

Unaudited	July 2, 2021		October 2, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	966,146	$	862,424
Receivables and contract assets	3,188,950		3,167,310
Prepaid expenses and other	137,072		162,355
Investment in equity securities	450,113		347,510
Total current assets	4,742,281		4,539,599
Property, Equipment and Improvements, net	355,252		319,371
Other Noncurrent Assets:
Goodwill	7,232,270		5,639,091
Intangibles, net	1,635,221		658,340
Deferred income tax assets	178,901		211,047
Operating lease right-of-use assets	671,867		576,915
Miscellaneous	393,492		409,990
Total other noncurrent assets	10,111,751		7,495,383
	$	15,209,284	$	12,354,353
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	53,813	$	—
Accounts payable	923,265		1,061,754
Accrued liabilities	1,525,987		1,249,883
Operating lease liability	174,698		164,312
Contract liabilities	565,457		465,648
Total current liabilities	3,243,220		2,941,597
Long-term Debt	3,067,745		1,676,941
Liabilities relating to defined benefit pension and retirement plans	537,240		568,176
Deferred income tax liabilities	204,262		3,366
Long-term operating lease liability	792,602		735,202
Other deferred liabilities	576,423		573,404
Commitments and Contingencies
Redeemable Noncontrolling interests	601,175		—
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized – 1,000,000 shares; issued and outstanding – none	—		—
Common stock, $1 par value, authorized – 240,000,000 shares; issued and outstanding – 130,293,392 shares and 129,747,783 shares as of July 2, 2021 and October 2, 2020, respectively	130,293		129,748
Additional paid-in capital	2,646,851		2,598,446
Retained earnings	4,246,173		4,020,575
Accumulated other comprehensive loss	(870,411)		(933,057)
Total Jacobs stockholders’ equity	6,152,906		5,815,712
Noncontrolling interests	33,711		39,955
Total Group stockholders’ equity	6,186,617		5,855,667
	$	15,209,284	$	12,354,353

*Statement of Cash Flow (in thousands):*

	For the Three Months Ended				For the Nine Months Ended
Unaudited	July 2, 2021		June 26, 2020		July 2, 2021		June 26, 2020
Cash Flows from Operating Activities:
Net earnings attributable to the Group	$	174,592	$	254,050	$	361,475	$	431,517
Adjustments to reconcile net earnings to net cash flows provided by operations:
Depreciation and amortization:
Property, equipment and improvements	26,405		22,276		74,484		66,994
Intangible assets	49,555		23,135		103,308		67,074
Gain on sale of ECR business	—		(31,456)		(15,608)		(113,366)
(Gain) loss on investment in equity securities	(37,702)		(131,350)		(152,145)		138,875
Stock based compensation	14,542		12,373		41,519		36,208
Equity in earnings of operating ventures, net of return on capital distributions	(3,092)		(1,924)		3,261		(1,689)
Loss (gain) on disposals of assets, net	396		(54)		749		(301)
Impairment of equity method investment and other long term assets	6,941		—		40,138		—
Loss on pension and retiree medical plan changes	—		—		—		2,651
Deferred income taxes	(2,644)		(10,967)		38,419		62,473
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets, net of contract liabilities	158,450		78,070		231,992		(135,615)
Prepaid expenses and other current assets	32,681		28,679		47,202		19,902
Miscellaneous other assets	31,510		9,094		107,911		77,524
Accounts payable	2,014		37,585		(150,736)		(115,080)
Accrued liabilities	(257,970)		(25,296)		(158,772)		(78,863)
Other deferred liabilities	(22,495)		97,082		(44,985)		(56,426)
Other, net	158		(1,789)		(4,639)		(27,402)
Net cash provided by operating activities	173,341		359,508		523,573		374,476
Cash Flows from Investing Activities:
Additions to property and equipment	(20,617)		(27,484)		(65,670)		(88,821)
Disposals of property and equipment and other assets	41		58		468		96
Capital contributions to equity investees, net of return of capital distributions	—		—		(4,193)		(12,358)
Acquisitions of businesses, net of cash acquired	—		—		(1,741,062)		(286,534)
Disposal of investment in equity securities	38,994		—		52,021		—
Proceeds (payments) related to sales of businesses	—		—		36,360		(5,061)
Net cash provided by (used for) investing activities	18,418		(27,426)		(1,722,076)		(392,678)
Cash Flows from Financing Activities:
Net (repayments) proceeds from borrowings	(358,503)		(954,863)		1,423,854		756,508
Debt issuance costs	(50)		—		(2,747)		(1,807)
Proceeds from issuances of common stock	11,130		9,873		29,715		28,793
Common stock repurchases	—		—		(24,949)		(285,822)
Taxes paid on vested restricted stock	(154)		(2,913)		(25,796)		(27,655)
Cash dividends, including to noncontrolling interests	(38,004)		(33,991)		(119,884)		(97,521)
Net cash (used for) provided by financing activities	(385,581)		(981,894)		1,280,193		372,496
Effect of Exchange Rate Changes	5,699		18,743		34,617		39,448
Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash	(188,123)		(631,069)		116,307		393,742
Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period	1,166,854		1,655,879		862,424		631,068
Cash and Cash Equivalents, including Restricted Cash, at the End of the Period	$	978,731	$	1,024,810	$	978,731	$	1,024,810

*Backlog (in millions):*

	July 2, 2021		June 26, 2020
Critical Mission Solutions	$	9,565	$	9,066
People & Places Solutions	15,557		14,608
PA Consulting	314		—
Total	$	25,436	$	23,674

Non-GAAP Financial Measures:

In this press release, the Company has included certain non-GAAP financial measures as defined in Regulation G promulgated under the Securities Exchange Act of 1934, as amended. The non-GAAP financial measures included in this press release are net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations, adjusted EBITDA outlook, adjusted EPS accretion outlook and adjusted effective tax rate.

Net revenue is calculated excluding pass-through revenue of the Company’s People & Places Solutions segment from the Company’s revenue from continuing operations. Adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated by (i) excluding the costs related to our 2015 restructuring activities, which included involuntary terminations, the abandonment of certain leased offices, combining operational organizations and the co-location of employees into other existing offices; and charges associated with our Europe, U.K. and Middle East region, which included write-offs on contract accounts receivable and charges for statutory redundancy and severance costs; (ii) excluding costs and other charges associated with restructuring activities implemented in connection with the acquisitions of The KeyW Holding Corporation (“KeyW”), CH2M, John Wood Group nuclear business and Buffalo Group, and the strategic investment in PA Consulting, the sale of the ECR business and other related cost reduction initiatives, which included involuntary terminations, costs associated with co-locating Jacobs, KeyW and CH2M offices, separating physical locations of ECR and continuing operations, professional services and personnel costs, costs and charges associated with the divestiture of joint venture interests to resolve potential conflicts arising from the CH2M acquisition, expenses relating to certain commitments and contingencies relating to discontinued operations of the CH2M business, charges associated with certain operations in India, which included write-offs on contract accounts receivable and other accruals, and similar costs and expenses; (iii) excluding the costs and other charges associated with our Focus 2023 transformation initiatives commenced in the fourth quarter of fiscal 2020, which included costs and charges associated with the re-scaling and repurposing of physical office space, voluntary employee separations, contractual termination fees and related expenses (the amounts referred in (i), (ii) and (iii) are collectively referred to as the “Restructuring and other charges”); (iv) excluding transaction costs and other charges incurred in connection with closing of the KeyW, CH2M, John Wood Group nuclear business and Buffalo Group acquisitions and the strategic investment in PA Consulting, including advisor fees, change in control payments, costs and expenses relating to the registration and listing of Jacobs stock issued in connection with the CH2M acquisition, certain consideration amounts for PA Consulting that were required to be treated as post-completion compensation expense given retention related requirements applicable to the distribution of such funds to PA Consulting employees, and impacts resulting from the non-cash purchase accounting adjustment related to the investment in PA Consulting to reflect a change in the preliminary purchase price allocation for the redeemable non-controlling interests , the impact of the third quarter adjustment to the estimated future payout of contingent consideration to the sellers in the Buffalo Group acquisition, and similar transaction costs and expenses (collectively referred to as “transaction costs”); (v) adding back amortization of intangible assets; (vi) the reclassification of revenue under the Company’s transition services agreement (TSA) with Worley included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of remaining unreimbursed costs associated with the TSA; (vii) the removal of fair value adjustments and dividend income related to the Company’s investments in Worley and C3 stock and certain foreign currency revaluations relating to ECR sale proceeds; (viii) excluding charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform and tax rate increases in the United Kingdom during fiscal 2021; (ix) charges associated with the impairment of our investment in AWE; (x) certain non-routine income tax adjustments for the purposes of calculating the Company’s annual non-GAAP effective tax rate to facilitate a more meaningful evaluation of the Company’s current operating performance and comparisons to the Company’s operating performance in other periods and (xi) other income tax adjustments associated with the pre-tax income adjustments above. Adjustments to derive adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated on an after-tax basis.

For fiscal 2021 outlook, the Company calculated adjusted EBITDA by adding income tax expense, depreciation expense and interest expense, and deducting interest income from adjusted net earnings from continuing operations.

We believe that net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations, adjusted EBITDA and adjusted effective tax rate are useful to management, investors and other users of our financial information in evaluating the Company’s operating results and understanding the Company’s operating trends by excluding or adding back the effects of the items described above and below, the inclusion or exclusion of which can obscure underlying trends. Additionally, management uses such measures in its own evaluation of the Company’s performance, particularly when comparing performance to past periods, and believes these measures are useful for investors because they facilitate a comparison of our financial results from period to period.

The Company provides non-GAAP measures to supplement U.S. GAAP measures, as they provide additional insight into the Company’s financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, U.S. GAAP measures. In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of the Company to those used by our peer companies.

The following tables reconcile the components and values of U.S. GAAP net earnings from continuing operations and EPS from continuing operations to the corresponding “adjusted” amounts and revenue from continuing operations to net revenue. For the comparable periods presented below, such adjustments consist of amounts incurred in connection with the items described above. Amounts are shown in thousands, except for per-share data. Reconciliation of the adjusted EPS and adjusted EBITDA outlook and adjusted EPS accretion outlook for fiscal 2021 and 2020 to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation (note: earnings per share amounts may not add across due to rounding).

*U.S. GAAP Reconciliation for the third quarter of fiscal 2021 and 2020*

	Three Months Ended
	July 2, 2021
Unaudited	U.S. GAAP		Effects of Restructuring, Transaction and Other Charges (1)		Other Adjustments (2)		Adjusted
Revenues	$	3,576,436	$	—	$	—	$	3,576,436
Pass through revenue	—		—		(612,045)		(612,045)
Net revenue	3,576,436		—		(612,045)		2,964,391
Direct cost of contracts	(2,759,501)		(3)		612,045		(2,147,459)
Gross profit	816,935		(3)		—		816,932
Selling, general and administrative expenses	(553,189)		1,971		49,555		(501,663)
Operating Profit	263,746		1,968		49,555		315,269
Total other income (expense), net	19,648		5,674		(39,693)		(14,371)
Earnings from Continuing Operations Before Taxes	283,394		7,642		9,862		300,898
Income Tax Expense from Continuing Operations	(109,186)		(7,287)		56,107		(60,366)
Net Earnings of the Group from Continuing Operations	174,208		355		65,969		240,532
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(9,182)		—		—		(9,182)
Net Loss Attributable to Redeemable Noncontrolling interests	384		3,553		(19,614)		(15,677)
Net Earnings Attributable to Jacobs from Continuing Operations	165,410		3,908		46,355		215,673
Net Earnings Attributable to Discontinued Operations	384		—		—		384
Net Earnings attributable to Jacobs	$	165,794	$	3,908	$	46,355	$	216,057
Preferred Redeemable Noncontrolling interests redemption value adjustment	(57,307)		57,307		—		—
Net earnings from continuing operations allocated to common stock for EPS calculation	$	108,103	$	61,215	$	46,355	$	215,673
Diluted Net Earnings from Continuing Operations Per Share	$	0.82	$	0.47	$	0.35	$	1.64
Diluted Net Earnings from Discontinued Operations Per Share	$	—	$	—	$	—	$	—
Diluted Earnings Per Share	$	0.83	$	0.47	$	0.35	$	1.64
Operating profit margin	7.4 %						10.6 %

(1) Includes charges associated with various restructuring, transaction and other related activity costs associated with Company transformation and acquisition related programs. Also includes $(57.3) million or $(0.44) per share in EPS numerator adjustments relating to the PA preference shares redemption value, which does not affect net earnings.

(2) Includes mainly (a) the removal of pass through revenues and costs for the People & Places Solutions line of business for the calculation of operating profit margin as a percentage of net revenue of $612.0 million, (b) the removal of amortization of intangible assets of $49.6 million, (c) the removal of $38.7 million in fair value adjustments related to our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale, (d) the removal of the fair value adjustment of the Company’s investment in C3 of $1.0 million, (e) the exclusion of impacts on the Company’s effective tax rates associated with revised estimates on US taxation of certain foreign earnings, certain tax return filing adjustments and the removal of $30.8 million in additional income tax expense attributable to tax rate increases in the UK during in 2021, (f) associated noncontrolling interest impacts for the above adjustment items and (g) income tax expense adjustments for the above pre-tax adjustment items.

	Three Months Ended
	June 26, 2020
Unaudited	U.S. GAAP		Effects of Restructuring, Transaction and Other Charges		Other Adjustments (1)		Adjusted
Revenues	$	3,260,057	$	—	$	—	$	3,260,057
Pass through revenue	—		—		(578,717)		(578,717)
Net revenue	3,260,057		—		(578,717)		2,681,340
Direct cost of contracts	(2,631,031)		1,841		578,717		(2,050,473)
Gross profit	629,026		1,841		—		630,867
Selling, general and administrative expenses	(434,650)		18,631		24,083		(391,936)
Operating Profit	194,376		20,472		24,083		238,931
Total other income (expense), net	109,305		—		(123,971)		(14,666)
Earnings from Continuing Operations Before Taxes	303,681		20,472		(99,888)		224,265
Income Tax Expense from Continuing Operations	(67,674)		(6,351)		24,125		(49,900)
Net Earnings of the Group from Continuing Operations	236,007		14,121		(75,763)		174,365
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(9,121)		—		—		(9,121)
Net Earnings from Continuing Operations attributable to Jacobs	226,886		14,121		(75,763)		165,244
Net Earnings Attributable to Discontinued Operations	18,043		—		—		18,043
Net Earnings attributable to Jacobs	$	244,929	$	14,121	$	(75,763)	$	183,287
Diluted Net Earnings from Continuing Operations Per Share	$	1.73	$	0.11	$	(0.58)	$	1.26
Diluted Net Earnings from Discontinued Operations Per Share	$	0.14	$	—	$	—	$	0.14
Diluted Earnings Per Share	$	1.87	$	0.11	$	(0.58)	$	1.40
Operating profit margin	6.0 %						8.9 %

(1) Includes (a) the removal of pass through revenues and costs for the People & Places Solutions line of business for the calculation of operating profit margin as a percentage of net revenue of $578.7 million, (b) the removal of amortization of intangible assets of $23.1 million, (c) the reclassification of revenues under the Company’s TSA of $1.0 million included in other income for U.S. GAAP reporting purposes to SG&A, (d) the removal of $123.1 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale and (e) associated income tax expense adjustments for the above pre-tax adjustment items.

	Nine Months Ended
	July 2, 2021
Unaudited	U.S. GAAP		Effects of Restructuring, Transaction and Other Charges (1)		Other Adjustments (2)		Adjusted
Revenues	$	10,506,144	$	—	$	—	$	10,506,144
Pass through revenue	—		—		(1,837,350)		(1,837,350)
Net revenue	10,506,144		—		(1,837,350)		8,668,794
Direct cost of contracts	(8,290,137)		283		1,837,350		(6,452,504)
Gross profit	2,216,007		283		—		2,216,290
Selling, general and administrative expenses	(1,779,435)		345,442		103,282		(1,330,711)
Operating Profit	436,572		345,725		103,282		885,579
Total other income (expense), net	88,650		42,871		(151,992)		(20,471)
Earnings from Continuing Operations Before Taxes	525,222		388,596		(48,710)		865,108
Income Tax Expense from Continuing Operations	(175,437)		(29,398)		10,186		(194,649)
Net Earnings of the Group from Continuing Operations	349,785		359,198		(38,524)		670,459
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(29,366)		—		—		(29,366)
Net Loss Attributable to Redeemable Noncontrolling interests	101,776		(103,480)		(20,981)		(22,685)
Net Earnings Attributable to Jacobs from Continuing Operations	422,195		255,718		(59,505)		618,408
Net Earnings Attributable to Discontinued Operations	11,690		—		—		11,690
Net Earnings attributable to Jacobs	$	433,885	$	255,718	$	(59,505)	$	630,098
Preferred Redeemable Noncontrolling interests redemption value adjustment	(57,307)		57,307		—		—
Net earnings from continuing operations allocated to common stock for EPS calculation	$	364,888	$	313,025	$	(59,505)	$	618,408
Diluted Net Earnings from Continuing Operations Per Share	$	2.78	$	2.39	$	(0.45)	$	4.71
Diluted Net Earnings from Discontinued Operations Per Share	$	0.09	$	—	$	—	$	0.09
Diluted Earnings Per Share	$	2.87	$	2.39	$	(0.45)	$	4.80
Operating profit margin	4.2 %						10.2 %

(1) Includes charges associated with various restructuring, transaction and other related activity costs associated with Company transformation and acquisition related programs, impairment charges relating to our investment in AWE, along with after-tax $287.2 million in PA Consulting deal related costs and associated noncontrolling interest impacts for the above adjustment items . Also includes $(57.3) million or $(0.44) per share in EPS numerator adjustments relating to the PA preference shares redemption value, which does not affect net earnings.

(2) Includes mainly (a) the removal of pass through revenues and costs for the People & Places Solutions line of business for the calculation of operating profit margin as a percentage of net revenue of $1.8 billion, (b) the removal of amortization of intangible assets of $103.3 million, (c) the removal of $102.2 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, (d) the removal of the fair value adjustment of the Company’s investment in C3 of $49.6 million, (e) the exclusion of impacts on the Company’s effective tax rates associated with revised estimates on US taxation of certain foreign earnings, certain tax return filing adjustments and the removal of $30.8 million in additional income tax expense attributable to tax rate increases in the UK during in 2021, (f) associated noncontrolling interest impacts for the above adjustment items and (g) income tax expense adjustments for the above pre-tax adjustment items.

	Nine Months Ended
	June 26, 2020
Unaudited	U.S. GAAP		Effects of Restructuring, Transaction and Other Charges		Other Adjustments (1)		Adjusted
Revenues	$	10,047,286	$	—	$	—	$	10,047,286
Pass through revenue	—		—		(1,921,863)		(1,921,863)
Net revenue	10,047,286		—		(1,921,863)		8,125,423
Direct cost of contracts	(8,125,554)		1,841		1,921,863		(6,201,850)
Gross profit	1,921,732		1,841		—		1,923,573
Selling, general and administrative expenses	(1,408,232)		113,698		82,962		(1,211,572)
Operating Profit	513,500		115,539		82,962		712,001
Total other (expense) income, net	(132,453)		2,799		103,720		(25,934)
Earnings from Continuing Operations Before Taxes	381,047		118,338		186,682		686,067
Income Tax Expense from Continuing Operations	(75,041)		(31,133)		(45,069)		(151,243)
Net Earnings of the Group from Continuing Operations	306,006		87,205		141,613		534,824
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(21,662)		—		—		(21,662)
Net Earnings from Continuing Operations attributable to Jacobs	284,344		87,205		141,613		513,162
Net Earnings Attributable to Discontinued Operations	125,511		—		—		125,511
Net Earnings attributable to Jacobs	$	409,855	$	87,205	$	141,613	$	638,673
Diluted Net Earnings from Continuing Operations Per Share	$	2.13	$	0.65	$	1.06	$	3.85
Diluted Net Earnings from Discontinued Operations Per Share	$	0.94	$	—	$	—	$	0.94
Diluted Earnings Per Share	$	3.08	$	0.65	$	1.06	$	4.80
Operating profit margin	5.11 %						8.76 %

(1) Includes (a) the removal of pass through revenues and costs for the People & Places Solutions line of business for the calculation of operating profit margin as a percentage of net revenue of $1.9 billion, (b) the removal of amortization of intangible assets of $67.1 million, (c) the reclassification of revenues under the TSA of $15.2 million included in other income for U.S. GAAP reporting purposes to SG&A, (d) the removal of$119.0 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale and (e) associated income tax expense adjustments for the above pre-tax adjustment items.

Earnings Per Share:

	Three Months Ended				Nine Months Ended
Unaudited	July 2, 2021		June 26, 2020		July 2, 2021		June 26, 2020
Numerator for Basic and Diluted EPS:
Net earnings attributable to Jacobs from continuing operations	$	165,410	$	226,886	$	422,195	$	284,344
Preferred Redeemable Noncontrolling interests redemption value adjustment	(57,307)		—		(57,307)		—
Net earnings from continuing operations allocated to participating securities	—		(24)		—		(77)
Net earnings from continuing operations allocated to common stock for EPS calculation	$	108,103	$	226,862	$	364,888	$	284,267

Net earnings attributable to Jacobs from discontinued operations	$	384	$	18,043	$	11,690	$	125,511
Net earnings from discontinued operations allocated to participating securities	—		(2)		—		(34)
Net earnings from discontinued operations allocated to common stock for EPS calculation	$	384	$	18,041	$	11,690	$	125,477

Net earnings allocated to common stock for EPS calculation	$	108,487	$	244,903	$	376,578	$	409,744

Denominator for Basic and Diluted EPS:
Weighted average basic shares	130,385		130,229		130,205		131,995
Shares allocated to participating securities	—		(14)		—		(36)
Shares used for calculating basic EPS attributable to common stock	130,385		130,215		130,205		131,959

Effect of dilutive securities:
Stock compensation plans	1,035		1,048		1,040		1,188
Shares used for calculating diluted EPS attributable to common stock	131,420		131,263		131,245		133,147

Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$	0.83	$	1.74	$	2.80	$	2.15
Basic Net Earnings from Discontinued Operations Per Share	$	—	$	0.14	$	0.09	$	0.95
Basic Earnings Per Share	$	0.83	$	1.88	$	2.89	$	3.11
Diluted Net Earnings from Continuing Operations Per Share	$	0.82	$	1.73	$	2.78	$	2.13
Diluted Net Earnings from Discontinued Operations Per Share	$	—	$	0.14	$	0.09	$	0.94
Diluted Earnings Per Share	$	0.83	$	1.87	$	2.87	$	3.08

For additional information contact:

Investors:
Jonathan Doros, 214-583-8596
[email protected]

Media:
Marietta Hannigan, 214-920-8035
[email protected]

View original content to download multimedia:https://www.prnewswire.com/news-releases/jacobs-reports-fiscal-third-quarter-earnings-301346584.html

SOURCE Jacobs

August 3, 2021 6:43 am

International Game Technology PLC Reports Second Quarter 2021 Results

– Revenue up 74% to over $1.0 billion, fueled by strong increases in all businesses, including 35% Global Lottery same-store sales growth

– Delivered operating income of $244 million, highlighting impressive Global Lottery operating leverage and excellent progress on structural cost savings

– Net income of $365 million comprised of $39 million loss from continuing operations and income from discontinued operations of $404 million, including gain on sale of assets

– Adjusted EBITDA increases 170% to $442 million, among the highest in Company history

– Generated $500 million in cash from continuing operations and a record-level $380 million of free cash flow during the first half of the year

– $1.0 billion net debt reduction in first half; net debt leverage improved from 6.4x to 4.3x, reaching target six months early

– Raising 2021 outlook; now expect to exceed 2019 levels for key financial metrics this year

PR Newswire

LONDON, Aug. 3, 2021 /PRNewswire/ — International Game Technology PLC (“IGT”) (NYSE:IGT) today reported financial results for the second quarter ended June 30, 2021. Today, at 8:00 a.m. EDT, management will host a conference call and webcast to present the results; access details are provided below.

“Impressive second quarter results highlight the vitality of our portfolio,” said Marco Sala, CEO of IGT. “Outstanding Lottery performance, the progressive recovery in land-based Gaming, and strong increase in Digital & Betting activities drove substantial revenue and profit growth, delivering Adjusted EBITDA that is among the highest recorded in a quarterly period. On the strength of the first half performance, we are raising our outlook for the year and now expect to exceed 2019 levels for key financial metrics this year.”

“Record free cash flow from continuing operations and proceeds from recent asset sales fueled significant debt reduction in the first half,” said Max Chiara, CFO of IGT. “Our leverage profile improved substantially, reaching pre-pandemic levels well ahead of expectations, and improving our credit profile and overall financial condition.”

Overview of Consolidated Second Quarter 2021 Results

	Quarter Ended		Y/Y Change (%)	Constant Currency Change (%)
All amounts from continuing operations	June 30,
	2021	2020
($ in millions, unless otherwise noted)
GAAP Financials:
Revenue
Global Lottery	725	460	58%	50%
Global Gaming	316	140	126%	120%
Total revenue	1,041	600	74%	67%

Operating income (loss)
Global Lottery	300	107	180%	163%
Global Gaming	10	(111)	NA	NA
Corporate support expense	(26)	(26)	—%	11%
Other⁽¹⁾	(40)	(43)	7%	7%
Total operating income (loss)	244	(72)	NA

Net cash provided by operating activities	249	127	95%

Cash and cash equivalents	639	1,338	(52)%

Non-GAAP Financial Measures:
Adjusted EBITDA
Global Lottery	414	221	87%	76%
Global Gaming	49	(36)	NA	NA
Corporate support expense	(21)	(20)	(2)%	12%
Total Adjusted EBITDA	442	164	170%	157%

Free cash flow	176	73	140%

Net debt⁽²⁾	6,312	7,297	(13)%

⁽¹⁾Primarily includes purchase price amortization

⁽²⁾Historical net debt recast to only reflect continuing operations

Note: Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided at the end of this news release

Key Highlights:

Global Lottery delivers second-highest revenue and profit levels in segment history, driven by strong player demand
Achieved approximately two-thirds of $200M+ 2021 OPtiMa savings targets year-to-date
Global Gaming returns to profitability as progressive recovery continues; Digital & Betting revenue increases 41% in the quarter
Growing adoption of IGT’s best-in-class cashless solutions, most recently with Agua Caliente Casinos and Washington’s Lottery
Completed sale of Italy B2C gaming businesses; net proceeds used to partially fund full redemption, by make-whole call, of 4.750% Senior Secured Euro Notes due February 2023
Announced 25th anniversary of Wheel of Fortune^® Slots; deployed Wheel of Fortune^®-themed Historical Horse Racing games at Churchill Downs in Kentucky
Signed seven-year systems contract with Maryland Lottery connecting 11,500 Video Lottery Terminals and Electronic Table Games across six casinos
Expanded availability of PeakSlant49^™ cabinet, with high-performing core video content, under purchase model
Recently won “Casino Supplier of the Year” award in 2021 Global Gaming Awards London

Financial highlights:

Consolidated revenue of $1.0 billion, up 74% from the prior year

Global Lottery revenue rises 58% to $725 million, driven by 35% growth in same-store sales
Global Gaming revenue totals $316 million, up 126% from the prior year and 19% sequentially on continued recovery trends

Operating income of $244 million compared to operating loss of $72 million in the prior year

High profit flow-through of Global Lottery same-store sales growth
Mix of high-margin Italy lottery sales
Disciplined cost management and benefits from OPtiMa structural cost-savings program

Net interest expense of $91 million compared to $96 million in the prior year, driven by lower average debt balances and interest rates

Provision for income taxes of $32 million compared to a benefit from income taxes of $3 million in the prior year, on significant increase in operating profitability

Net loss of $39 million versus net loss of $268 million in the prior-year period, primarily driven by significant increase in revenue

Adjusted EBITDA of $442 million compared to $164 million in the prior-year period; Global Lottery delivers near record segment-level Adjusted EBITDA

Net debt of $6.3 billion, down over $1.0 billion from $7.3 billion at December 31, 2020; Net debt leverage of 4.3x, down from 6.4x at December 31, 2020, driven by strong financial results, cash flow generation, and proceeds from sale of Italy gaming businesses

Cash and Liquidity Update

Total liquidity of $1.9 billion as of June 30, 2021; $639 million in unrestricted cash and $1.3 billion in additional borrowing capacity
$748 million in net cash proceeds from sale of Italy gaming businesses used to fund redemption of 4.750% Euro bonds due 2023
Executed amendment and extension of Term Loan Facility in July, increasing liquidity, extending debt maturities, and lowering interest costs

Outlook

Second half 2021 revenue and operating income from continuing operations of $2.0 billion and $300 million, respectfully, meaningfully higher than prior year

Global Lottery returns to more normal growth rates applied to higher levels of consumption; third quarter-to-date same-store sales up double digits versus 2019
Global Gaming progressive recovery continues

Second half 2021 compared to first half 2021

Revenue, operating income, and cash from operations lower on normalization of lottery growth trends
Capital expenditures of approximately $175 million, sequentially accelerating to support growth; full year capital expenditures below 2019 levels
Depreciation and amortization stable

Does not factor in any additional impact from COVID-19 restrictions

Conference Call and Webcast

August 3, 2021, at 8:00 a.m. EDT

Live webcast available under “News, Events & Presentations” on IGT’s Investor Relations website at www.IGT.com; replay available on the website following the live event

Dial-In Numbers

US/Canada toll-free dial-in number: +1 866 968-0344
Outside the US/Canada toll-free number: +1 873 415-0264
Conference ID/confirmation code: 8589154
A telephone replay of the call will be available for one week

US/Canada replay number: +1 800 585-8367
Outside the US/Canada replay number: +1 416 621-4642
ID/Confirmation code: 8589154

Note: Certain totals in the tables included in this press release may not add due to rounding

Comparability of Results

All figures presented in this news release are prepared under U.S. GAAP, unless noted otherwise. Adjusted figures exclude the impact of items such as purchase accounting, impairment charges, restructuring expense, foreign exchange, and certain one-time, primarily transaction-related items. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables in this news release. Constant currency changes for 2021 are calculated using the same foreign exchange rates as the corresponding 2020 period. Management uses non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate the Company’s financial performance. Management believes these non-GAAP financial measures reflect the Company’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of business trends. These constant currency changes and non-GAAP financial measures should however be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with U.S. GAAP.

About IGT

IGT (NYSE:IGT) is the global leader in gaming. We deliver entertaining and responsible gaming experiences for players across all channels and regulated segments, from Gaming Machines and Lotteries to Sports Betting and Digital. Leveraging a wealth of compelling content, substantial investment in innovation, player insights, operational expertise, and leading-edge technology, our solutions deliver unrivalled gaming experiences that engage players and drive growth. We have a well-established local presence and relationships with governments and regulators in more than 100 countries around the world, and create value by adhering to the highest standards of service, integrity, and responsibility. IGT has approximately 11,000 employees. For more information, please visit www.IGT.com.

Cautionary Statement Regarding Forward-Looking Statements

This news release may contain forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning International Game Technology PLC and its consolidated subsidiaries (the “Company”) and other matters. These statements may discuss goals, intentions, and expectations as to future plans, trends, events, dividends, results of operations, or financial condition, or otherwise, based on current beliefs of the management of the Company as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “would,” “should,” “shall”, “continue,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or the negative or other variations of them. These forward-looking statements speak only as of the date on which such statements are made and are subject to various risks and uncertainties, many of which are outside the Company’s control. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may differ materially from those predicted in the forward-looking statements and from past results, performance, or achievements. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) the factors and risks described in the Company’s annual report on Form 20-F for the financial year ended December 31, 2020 and other documents filed from time to time with the SEC, which are available on the SEC’s website at www.sec.gov and on the investor relations section of the Company’s website at www.IGT.com. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements. You should carefully consider these factors and other risks and uncertainties that affect the Company’s business. Nothing in this news release is intended, or is to be construed, as a profit forecast or to be interpreted to mean that the financial performance of International Game Technology PLC for the current or any future financial years will necessarily match or exceed the historical published financial performance of International Game Technology PLC, as applicable. All forward-looking statements contained in this news release are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to International Game Technology PLC, or persons acting on its behalf, are expressly qualified in their entirety by this cautionary statement.

Non-GAAP Financial Measures

Management supplements the reporting of financial information, determined under GAAP, with certain non-GAAP financial information. Management believes the non-GAAP information presented provides investors with additional useful information, but it is not intended to nor should it be considered in isolation or as a substitute for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. The Company encourages investors to review its financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Adjusted EBITDA represents net income (loss) from continuing operations (a GAAP measure) before income taxes, interest expense, foreign exchange gain (loss), other non-operating expenses, depreciation, impairment losses, amortization (service revenue, purchase accounting and non-purchase accounting), restructuring expenses, stock-based compensation, litigation expense (income), and certain other non-recurring items. Other non-recurring items are infrequent in nature and are not reflective of ongoing operational activities. For the business segments, Adjusted EBITDA represents segment operating income (loss) before depreciation, amortization (service revenue, purchase accounting and non-purchase accounting), restructuring expenses, stock-based compensation, litigation expense (income) and certain other non-recurring items. Adjusted EBITDA – discontinued operations represents income (loss) from discontinued operations (a GAAP measure) before income taxes, interest expense, depreciation and amortization, and gain on sale of discontinued operations. Adjusted EBITDA – combined represents Total Adjusted EBITDA plus Adjusted EBITDA – discontinued operations. Management believes that the non-GAAP measures just mentioned are useful in providing period-to-period comparisons of the results of the Company’s ongoing operational performance.

Net debt is a non-GAAP financial measure that represents debt (a GAAP measure, calculated as long-term obligations plus short-term borrowings) minus capitalized debt issuance costs and cash and cash and equivalents. Cash and cash equivalents are subtracted from the GAAP measure because they could be used to reduce the Company’s debt obligations. Management believes that net debt is a useful measure to monitor leverage and evaluate the balance sheet.

Net debt leverage is a non-GAAP financial measure that represents the ratio of Net debt as of a particular balance sheet date to Adjusted EBITDA for the last twelve months (“LTM”) prior to such date. Prior to the disposal of the Italian B2C gaming businesses in the second quarter of 2021, management calculated the Net debt leverage ratio as the ratio of Net debt as of a particular balance sheet date to the LTM of Adjusted EBITDA – combined prior to such date. Management believes that Net debt leverage is a useful measure to assess our financial strength and ability to incur incremental indebtedness when making key investment decisions.

Free cash flow is a non-GAAP financial measure that represents cash flow from operations (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing IGT’s ability to fund its activities, including debt service and distribution of earnings to shareholders.

Constant currency is a non-GAAP financial measure that expresses the current financial data using the prior-year/period exchange rate (i.e., the exchange rates used in preparing the financial statements for the prior year). Management believes that constant currency is a useful measure to compare period-to-period results without regard to the impact of fluctuating foreign currency exchange rates.

A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this release. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.

Contact:

Phil O’Shaughnessy, Global Communications, toll free in U.S./Canada +1 (844) IGT-7452; outside U.S./Canada +1 (401) 392-7452
Francesco Luti, +39 3485475493; for Italian media inquiries
James Hurley, Investor Relations, +1 (401) 392-7190

Select Performance and KPI data: ($ in millions, unless otherwise noted)

						Sequential
				Constant		Change as
	Q2’21		Y/Y Change (%)	Currency		Reported
GLOBAL LOTTERY	Q2’21	Q2’20	Y/Y Change (%)	Change (%)⁽¹⁾	Q1’21	(%)
Revenue
Service
Operating and facilities management contracts	675	416	62%	55%	695	(3)%
Upfront license fee amortization	(53)	(48)	(9)%	—%	(52)	(1)%
Operating and facilities management contracts, net	623	367	70%	62%	643	(3)%
Other	79	70	12%	4%	83	(4)%
Total service revenue	702	438	60%	53%	725	(3)%

Product sales	23	22	6%	3%	23	(1)%
Total revenue	725	460	58%	50%	749	(3)%

Operating income	300	107	180%	163%	337	(11)%
Adjusted EBITDA⁽¹⁾	414	221	87%	76%	447	(7)%

Global same-store sales growth (%)
Instant ticket & draw games	34.9%	(7.1)%			27.4%
Multi-jurisdiction jackpots	28.8%	(24.2)%			94.7%
Total	34.5%	(8.5)%			32.4%

North America & Rest of world same-store sales growth (%)
Instant ticket & draw games	20.5%	3.5%			20.9%
Multi-jurisdiction jackpots	28.8%	(24.2)%			94.7%
Total	21.1%	0.6%			27.8%

Italy same-store sales growth (%)
Instant ticket & draw games	115.2%	(40.5)%			52.2%

⁽¹⁾ Non-GAAP measures; see disclaimer and reconciliations to the most directly comparable GAAP measure included herein

						Sequential
				Constant		Change as
	Q2’21		Y/Y Change (%)	Currency		Reported
GLOBAL GAMING	Q2’21	Q2’20	Y/Y Change (%)	Change (%)⁽¹⁾	Q1’21	(%)
Revenue
Service
Terminal	108	25	325%	323%	90	20%
Systems, software, and other	91	59	54%	50%	86	6%
Total service revenue	199	84	136%	132%	175	13%

Product sales
Terminal	86	44	97%	91%	62	40%
Other	31	12	160%	147%	29	7%
Total product sales revenue	117	56	110%	103%	91	29%
Total revenue	316	140	126%	120%	266	19%

Operating income (loss)	10	(111)	NA	NA	(19)	NA
Adjusted EBITDA⁽¹⁾	49	(36)	NA	NA	19	158%

Installed base units
Casino	47,964	48,704	(2)%		48,230
Casino – L/T lease⁽²⁾	1,136	930	22%		1,135
Total installed base units	49,100	49,634	(1)%		49,365

Installed base units (by geography)
US & Canada	33,820	34,800	(3)%		34,138
Rest of world	15,280	14,834	3%		15,227
Total installed base units	49,100	49,634	(1)%		49,365

Yields (by geography)⁽³⁾, in absolute $
US & Canada	$38.41	$8.69	342%		$32.27
Rest of world	$4.03	$0.49	NM		$2.58
Total yields	$27.49	$6.21	343%		$22.93

Global machine units sold
New/expansion	1,167	1,443	(19)%		884
Replacement	5,168	1,538	236%		3,521
Total machine units sold	6,335	2,981	113%		4,405

US & Canada machine units sold
New/expansion	643	1,382	(53)%		620
Replacement	3,485	1,330	162%		2,276
Total machine units sold	4,128	2,712	52%		2,896

⁽¹⁾ Non-GAAP measures; see disclaimer and reconciliations to the most directly comparable GAAP measure included herein
⁽²⁾ Excluded from yield calculations due to treatment as sales-type leases
⁽³⁾ Excludes Casino L/T lease units due to treatment as sales-type leases; comparability on a Y/Y basis hindered due to fewer active units

						Sequential
				Constant		Change as
	Q2’21		Y/Y Change (%)	Currency		Reported
GLOBAL GAMING (Continued)	Q2’21	Q2’20	Y/Y Change (%)	Change (%)⁽¹⁾	Q1’21	(%)
Rest of world machine units sold
New/expansion	524	61	NM		264
Replacement	1,683	208	NM		1,245
Total machine units sold	2,207	269	NM		1,509

Average Selling Price (ASP), in absolute $
US & Canada	$13,900	$14,700	(5)%		$13,900
Rest of world	$12,700	$14,000	(9)%		$13,700
Total ASP	$13,400	$14,600	(8)%		$13,800

Gaming Systems Revenue	39	23	66%		30



CONSOLIDATED
Revenue (by geography)
US & Canada	561	369	52%	51%	542	4%
Italy	353	146	141%	122%	348	1%
Rest of world	127	84	51%	40%	124	2%
Total revenue	1,041	600	74%	67%	1,015	3%

Digital & Betting Revenue ⁽²⁾	61	44	41%	34%	58	5%

⁽¹⁾ Non-GAAP measures; see disclaimer and reconciliations to the most directly comparable GAAP measure included herein
⁽²⁾ Included within consolidated revenue

International Game Technology PLC
Consolidated Statements of Operations
*($ in millions and shares in thousands, except per share amounts)*
*Unaudited*

	For the three months ended		For the six months ended
	June 30,		June 30,
	2021	2020	2021	2020
Service revenue	901	522	1,802	1,178
Product sales	140	78	254	236
Total revenue	1,041	600	2,055	1,414

Cost of services	438	361	880	776
Cost of product sales	88	67	160	160
Selling, general and administrative	207	168	393	332
Research and development	61	31	116	92
Goodwill impairment	—	—	—	296
Restructuring	—	43	—	47
Other operating expense	1	1	1	2
Total operating expenses	796	672	1,551	1,704

Operating income (loss)	244	(72)	504	(290)

Interest expense, net	91	96	185	196
Foreign exchange loss (gain), net	90	74	(55)	4
Other expense, net	70	28	94	29
Total non-operating expenses	251	198	224	229
(Loss) income from continuing operations before provision for (benefit from) income taxes	(7)	(271)	280	(519)
Provision for (benefit from) income taxes	32	(3)	181	(4)
(Loss) income from continuing operations	(39)	(268)	100	(515)
Income (loss) from discontinued operations, net of tax	13	(15)	24	(1)
Gain on sale of discontinued operations, net of tax	391	—	391	—
Income (loss) from discontinued operations	404	(15)	415	(1)
Net income (loss)	365	(282)	514	(516)
Less: Net income attributable to non-controlling interests from continuing operations	60	—	119	15
Less: Net loss attributable to non-controlling interests from discontinued operations	—	(3)	(2)	(4)
Net income (loss) attributable to IGT PLC	306	(280)	397	(528)

Net loss from continuing operations attributable to IGT PLC per common share – basic & diluted	(0.48)	(1.31)	(0.09)	(2.59)
Net income (loss) attributable to IGT PLC per common share – basic & diluted	1.49	(1.37)	1.94	(2.58)
Weighted-average shares – basic & diluted	205,096	204,748	204,977	204,591

International Game Technology PLC
Consolidated Balance Sheets
*($ in millions)*
*Unaudited*

	June 30,	December 31,
	2021	2020
Assets
Current assets:
Cash and cash equivalents	639	907
Restricted cash and cash equivalents	180	199
Trade and other receivables, net	974	846
Inventories	167	169
Other current assets	627	480
Assets held for sale	4	839
Total current assets	2,591	3,440
Systems, equipment and other assets related to contracts, net	990	1,068
Property, plant and equipment, net	122	132
Operating lease right-of-use assets	273	288
Goodwill	4,688	4,713
Intangible assets, net	1,499	1,577
Other non-current assets	1,727	1,774
Total non-current assets	9,300	9,552
Total assets	11,891	12,992

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	1,113	1,126
Current portion of long-term debt	—	393
Other current liabilities	908	847
Liabilities held for sale	—	250
Total current liabilities	2,021	2,615
Long-term debt, less current portion	6,959	7,857
Deferred income taxes	404	333
Operating lease liabilities	254	266
Other non-current liabilities	322	360
Total non-current liabilities	7,940	8,816
Total liabilities	9,961	11,431
Commitments and contingencies
IGT PLC’s shareholders’ equity	1,216	777
Non-controlling interests	714	784
Shareholders’ equity	1,930	1,561
Total liabilities and shareholders’ equity	11,891	12,992

International Game Technology PLC
Consolidated Statements of Cash Flows
*($ in millions)*
*Unaudited*
	For the three months ended		For the six months ended
	June 30,		June 30,
	2021	2020	2021	2020
Cash flows from operating activities
Net income (loss)	365	(282)	514	(516)
Less: Income (loss) from discontinued operations	404	(15)	415	(1)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities from continuing operations:
Foreign exchange loss (gain), net	90	74	(55)	4
Depreciation	83	88	165	173
Loss on extinguishment of debt	67	28	91	28
Amortization of upfront license fees	55	51	110	101
Amortization	50	52	100	108
Stock-based compensation	7	1	11	(12)
Debt issuance cost amortization	5	5	11	10
Goodwill impairment	—	—	—	296
Deferred income taxes	(18)	(13)	82	(37)
Other non-cash items, net	4	4	5	(1)
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Trade and other receivables	(48)	(192)	(134)	88
Inventories	1	10	5	(6)
Accounts payable	(91)	175	24	(19)
Other assets and liabilities	81	111	(14)	(67)
Net cash provided by operating activities from continuing operations	249	127	500	153
Net cash provided by (used in) operating activities from discontinued operations	5	40	(31)	172
Net cash provided by operating activities	254	168	469	325

Cash flows from investing activities
Capital expenditures	(73)	(54)	(121)	(140)
Proceeds from sale of assets	5	(1)	11	5
Other	2	—	1	11
Net cash used in investing activities from continuing operations	(66)	(55)	(108)	(124)
Net cash provided by (used in) investing activities from discontinued operations	743	(6)	734	(20)
Net cash provided by (used in) investing activities	677	(61)	626	(144)

Cash flows from financing activities
Principal payments on long-term debt	(1,035)	(527)	(2,422)	(959)
Payments in connection with the extinguishment of debt	(63)	(25)	(85)	(25)
Net (payments of) receipts from financial liabilities	(6)	(14)	3	36
Payments of debt issuance costs	(1)	(20)	(7)	(20)
Proceeds from long-term debt	—	750	750	750
Net proceeds from (repayments of) short-term borrowings	4	(35)	3	75
Net proceeds from (repayments of) Revolving Credit Facilities	84	(263)	516	725
Dividends paid	—	—	—	(41)
Dividends paid – non-controlling interests	(20)	(76)	(89)	(91)
Return of capital – non-controlling interests	(51)	—	(61)	—
Capital increase – non-controlling interests	1	—	11	2
Other	(5)	(4)	(10)	(6)
Net cash (used in) provided by financing activities	(1,091)	(213)	(1,392)	446

Net (decrease) increase in cash and cash equivalents and restricted cash and cash equivalents	(160)	(106)	(297)	627
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	23	18	(13)	8
Cash and cash equivalents and restricted cash and cash equivalents at the beginning of the period	956	1,618	1,129	894
Cash and cash equivalents and restricted cash and cash equivalents at the end of the period	819	1,530	819	1,530
Less: Cash and cash equivalents and restricted cash and cash equivalents of discontinued operations	—	19	—	19
Cash and cash equivalents and restricted cash and cash equivalents at the end of the period of continuing operations	819	1,511	819	1,511

Supplemental Cash Flow Information
Interest paid	53	49	219	231
Income taxes paid	35	7	39	18

International Game Technology PLC
Net Debt
*($ in millions)*
*Unaudited*

	June 30,	December 31,
	2021	2020
6.250% Senior Secured U.S. Dollar Notes due February 2022	—	1,004
4.750% Senior Secured Euro Notes due February 2023	—	1,038
5.350% Senior Secured U.S. Dollar Notes due October 2023	61	61
3.500% Senior Secured Euro Notes due July 2024	591	610
6.500% Senior Secured U.S. Dollar Notes due February 2025	1,093	1,092
4.125% Senior Secured U.S. Dollar Notes due April 2026	743	—
3.500% Senior Secured Euro Notes due June 2026	885	913
6.250% Senior Secured U.S. Dollar Notes due January 2027	745	744
2.375% Senior Secured Euro Notes due April 2028	590	608
5.250% Senior Secured U.S. Dollar Notes due January 2029	743	743
Senior Secured Notes	5,450	6,813

Euro Term Loan Facility due January 2023	1,014	1,044
Euro Revolving Credit Facility B due July 2024	495	—
Long-term debt, less current portion	6,959	7,857

Euro Term Loan Facility due January 2023	—	393
Current portion of long-term debt	—	393

Short-term borrowings	4	—
Total debt	6,963	8,250

Less: Cash and cash equivalents	639	907
Less: Debt issuance costs, net – Revolving Credit Facilities due July 2024	12	24
Net debt	6,312	7,319

Note: Net debt is a non-GAAP financial measure

International Game Technology PLC
Reconciliation of Non-GAAP Financial Measures
*($ in millions)*
*Unaudited*

	For the three months ended June 30, 2021
			Business
	Global	Global	Segment	Corporate	Total IGT
	Lottery	Gaming	Total	and Other	PLC
Loss from continuing operations					(39)
Provision for income taxes					32
Interest expense, net					91
Foreign exchange loss, net					90
Other non-operating expense, net					70
Operating income (loss)	300	10	310	(66)	244
Depreciation	49	35	83	—	83
Amortization – service revenue ⁽¹⁾	55	—	55	—	55
Amortization – non-purchase accounting	9	1	10	1	11
Amortization – purchase accounting	—	—	—	39	39
Stock-based compensation	2	2	3	4	7
Other ⁽²⁾	—	—	—	1	1
Adjusted EBITDA	414	49	463	(21)	442

Income from discontinued operations					404
Gain on sale of discontinued operations					(396)
Provision for income taxes					—
Interest expense, net					—
Depreciation					—
Amortization					—
Adjusted EBITDA – discontinued operations					9

Adjusted EBITDA – combined					451

Cash flows from operating activities – continuing operations					249
Capital expenditures					(73)
Free Cash Flow					176


⁽¹⁾ Includes amortization of upfront license fees
⁽²⁾ Primarily includes transaction-related costs

International Game Technology PLC
Reconciliation of Non-GAAP Financial Measures
*($ in millions)*
*Unaudited*

	For the three months ended June 30, 2020
			Business
	Global	Global	Segment	Corporate	Total IGT
	Lottery	Gaming	Total	and Other	PLC
Loss from continuing operations					(268)
Benefit from income taxes					(3)
Interest expense, net					96
Foreign exchange loss, net					74
Other non-operating expense, net					28
Operating income (loss)	107	(111)	(4)	(69)	(72)
Depreciation	50	37	87	—	88
Amortization – service revenue ⁽¹⁾	51	—	51	—	51
Amortization – non-purchase accounting	7	2	9	1	10
Amortization – purchase accounting	—	—	—	42	42
Restructuring	5	35	40	3	43
Stock-based compensation	—	—	—	1	1
Other ⁽²⁾	—	—	—	1	1
Adjusted EBITDA	221	(36)	184	(20)	164

Loss from discontinued operations					(15)
Benefit from income taxes					(8)
Interest expense, net					—
Depreciation					12
Amortization					14
Adjusted EBITDA – discontinued operations					4

Adjusted EBITDA – combined					167

Cash flows from operating activities – continuing operations					127
Capital expenditures					(54)
Free Cash Flow					73


⁽¹⁾ Includes amortization of upfront license fees
⁽²⁾ Primarily includes transaction-related costs

International Game Technology PLC
Reconciliation of Non-GAAP Financial Measures
*($ in millions)*
*Unaudited*

	For the six months ended June 30, 2021
			Business
	Global	Global	Segment	Corporate	Total IGT
	Lottery	Gaming	Total	and Other	PLC
Income from continuing operations					100
Provision for income taxes					181
Interest expense, net					185
Foreign exchange gain, net					(55)
Other non-operating expense, net					94
Operating income (loss)	637	(9)	628	(124)	504
Depreciation	96	70	166	(1)	165
Amortization – service revenue ⁽¹⁾	110	—	110	—	110
Amortization – non-purchase accounting	17	3	19	2	21
Amortization – purchase accounting	—	—	—	79	79
Restructuring	(1)	1	—	—	—
Stock-based compensation	2	3	5	6	11
Other ⁽²⁾	—	—	—	1	1
Adjusted EBITDA	862	67	929	(37)	892

Income from discontinued operations					415
Gain on sale of discontinued operations					(396)
Provision for income taxes					4
Interest expense, net					—
Depreciation					—
Amortization					—
Adjusted EBITDA – discontinued operations					23

Adjusted EBITDA – combined					915

Cash flows from operating activities – continuing operations					500
Capital expenditures					(121)
Free Cash Flow					380


⁽¹⁾ Includes amortization of upfront license fees
⁽²⁾ Primarily includes transaction-related costs

International Game Technology PLC
Reconciliation of Non-GAAP Financial Measures
*($ in millions)*
*Unaudited*

	For the six months ended June 30, 2020
			Business
	Global	Global	Segment	Corporate	Total IGT
	Lottery	Gaming	Total	and Other	PLC
Loss from continuing operations					(515)
Benefit from income taxes					(4)
Interest expense, net					196
Foreign exchange loss, net					4
Other non-operating expense, net					29
Operating income (loss)	251	(117)	135	(425)	(290)
Goodwill impairment	—	—	—	296	296
Depreciation	96	77	173	1	173
Amortization – service revenue ⁽¹⁾	101	—	101	—	101
Amortization – non-purchase accounting	14	3	17	2	19
Amortization – purchase accounting	—	—	—	89	89
Restructuring	5	36	41	6	47
Stock-based compensation	(4)	(5)	(9)	(3)	(12)
Other ⁽²⁾	—	—	—	2	2
Adjusted EBITDA	464	(6)	458	(33)	425

Loss from discontinued operations					(1)
Benefit from income taxes					(4)
Interest expense, net					—
Depreciation					25
Amortization					28
Adjusted EBITDA – discontinued operations					48

Adjusted EBITDA – combined					473

Cash flows from operating activities – continuing operations					153
Capital expenditures					(140)
Free Cash Flow					13


⁽¹⁾ Includes amortization of upfront license fees
⁽²⁾ Primarily includes transaction-related costs

The following table summarizes Adjusted EBITDA and Adjusted EBITDA – discontinued operations for the actual period end dates and LTM, and the respective net debt leverage calculations:

($ in millions)	Q3’20	Q4’20	Q1’21	Q2’21
Adjusted EBITDA	287	295	450	442
Adjusted EBITDA – discontinued operations	65	26	14	9
Adjusted EBITDA – combined	352	321	464	451

LTM Adjusted EBITDA ⁽¹⁾	1,078	1,008	1,196	1,474
LTM Adjusted EBITDA – combined ⁽¹⁾⁽²⁾	1,260	1,146	1,305	1,588

Net debt	7,243	7,319	7,069	6,312

Net debt leverage
LTM Adjusted EBITDA ⁽³⁾				4.3x
LTM Adjusted EBITDA – combined ⁽⁴⁾	5.7x	6.4x	5.4x	4.0x

⁽¹⁾Adjusted EBITDA was $164 million, $261 million, and $365 million for the quarters ended June 30, 2020, March 31, 2020, and December 31, 2019, respectively.

⁽²⁾ Adjusted EBITDA – discontinued operations was $4 million, $44 million, and $69 million for the quarters ended June 30, 2020, March 31, 2020, and December 31, 2019, respectively.

⁽³⁾ Net debt / LTM Adjusted EBITDA

⁽⁴⁾ Net debt / LTM Adjusted EBITDA – combined

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SOURCE International Game Technology PLC

August 3, 2021 6:35 am

First Citizens BancShares Reports Earnings For Second Quarter 2021

RALEIGH, N.C., Aug. 03, 2021 (GLOBE NEWSWIRE) — First Citizens BancShares Inc. (“BancShares”) (Nasdaq: FCNCA) reported another quarter of strong earnings for the second quarter of 2021. Key results for the quarter ended June 30, 2021, are presented below:

SECOND QUARTER RESULTS

Q2 2021

Q2 2020

Q2 2021

Q2 2020

Q2 2021

Q2 2020

Q2 2021

Q2 2020

Q2 2021

Q2 2020

Net income (in millions)

Net income per share

Net interest margin

Return on average assets

Return on average equity

$
152.8

$
153.8

$
15.09

$
14.74

2.68
%

3.14
%

1.13
%

1.36
%

14.64
%

16.43
%

YEAR-TO-DATE (“YTD”) RESULTS

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Net income (in millions)

Net income per share

Net interest margin

Return on average assets

Return on average equity

$
300.1

$
211.0

$
29.63

$
20.04

2.74
%

3.33
%

1.14
%

0.98
%

14.67
%

11.40
%

SECOND QUARTER HIGHLIGHTS

Net income		Net income was $152.8 million for the second quarter of 2021, a decrease of $1.0 million, or by 0.6% compared to the same quarter in 2020. Net income per common share was $15.09 for the second quarter of 2021, compared to $14.74 per share for the same quarter in 2020.

Return on average assets and equity		Return on average assets for the second quarter of 2021 was 1.13%, down from 1.36% for the comparable quarter in 2020. Return on average equity for the second quarter of 2021 was 14.64%, down from 16.43% for the comparable quarter in 2020.

Net interest income and net interest margin		Net interest income was $346.4 million for the second quarter of 2021, an increase of $9.0 million, or by 2.7% compared to the same quarter in 2020. The taxable-equivalent net interest margin (“NIM”) was 2.68% for the second quarter of 2021, down 46 basis points from 3.14% for the comparable quarter in 2020.

Provision for credit losses		The provision for credit losses was a benefit of $19.6 million during the second quarter of 2021, compared to a $20.6 million expense during the same quarter in 2020. The allowance for credit losses (“ACL”) was $189.1 million at June 30, 2021, compared to $224.3 million at December 31, 2020, representing 0.58% and 0.68% of loans, respectively.

Operating performance		Noninterest income was $134.2 million for the second quarter of 2021, a decrease of $31.3 million, or by 18.9% compared to the same quarter in 2020. Noninterest expense was $301.6 million for the second quarter of 2021, an increase of $9.9 million, or by 3.4% compared to the same quarter in 2020.

Loans and credit quality		Total loans declined to $32.7 billion, a decrease of $102.3 million, or by 0.6% on an annualized basis since December 31, 2020. Excluding loans originated under the Small Business Administration Paycheck Protection Program (“SBA-PPP”), total loans increased $604.7 million, or by 3.7% on an annualized basis since December 31, 2020. The net charge-off ratio was 0.02% for the second quarter of 2021 compared to 0.09% for the same quarter in 2020.

Deposits		Total deposits grew to $48.4 billion, an increase of $5.0 billion, or by 23.1% on an annualized basis since December 31, 2020 driven by organic growth and the effects of government stimulus.

Capital		BancShares remained well capitalized with a total risk-based capital ratio of 14.2%, a Tier 1 risk-based capital ratio of 12.1%, a Common Equity Tier 1 ratio of 11.1% and a Tier 1 leverage ratio of 7.7%.

MERGER WITH CIT GROUP INC.

On October 15, 2020, BancShares entered into a definitive merger agreement with CIT Group Inc. (“CIT”) through which the companies plan to combine in an all-stock merger. The transaction has been approved by the shareholders of both companies and has received regulatory approval from the North Carolina Commissioner of Banks and the Federal Deposit Insurance Corporation (“FDIC”). Completion of the proposed merger remains subject to approval from the Board of Governors of the Federal Reserve System and closing is expected in the third quarter, subject to such approval and the satisfaction or waiver of other customary closing conditions.

NET INTEREST INCOME

Net interest income was $346.4 million for the second quarter of 2021, an increase of $9.0 million, or by 2.7% compared to the same quarter in 2020. This was primarily due to lower rates paid on interest-bearing deposits, an increase in interest and fee income on SBA-PPP loans, and organic loan growth, partially offset by a decline in the yield on interest-earning assets. SBA-PPP loans contributed $27.2 million in interest and fee income for the second quarter of 2021 compared to $19.0 million for the same quarter in 2020. Net interest income increased $6.7 million, or by 2.0% compared to the linked quarter primarily due to higher investment portfolio balance and yield. The taxable-equivalent NIM was 2.68% during the second quarter of 2021, a decrease of 46 basis points from 3.14% for the comparable quarter in 2020. The margin decline was primarily due to changes in earning asset mix and a decline in the yield on interest-earning assets, partially offset by lower rates paid on interest-bearing deposits and the yield on SBA-PPP loans. The taxable-equivalent NIM declined 12 basis points from 2.80% for the linked quarter primarily due to changes in earning asset mix.

Net interest income was $686.0 million for the six months ended June 30, 2021, an increase of $10.3 million, or by 1.5% compared to the same period in 2020. This was primarily due to lower rates paid on interest-bearing deposits, an increase in interest and fee income on SBA-PPP loans, and organic loan growth, partially offset by a decline in the yield on interest-earning assets. SBA-PPP loans contributed $58.1 million in interest and fee income for the six months ended June 30, 2021, compared to $19.0 million for the same period in 2020. The taxable-equivalent NIM was 2.74% for the six months ended June 30, 2021, a decrease of 59 basis points from 3.33% for the comparable period in 2020. The margin decline was primarily due to changes in earning asset mix and a decline in the yield on interest-earning assets, partially offset by lower rates paid on interest-bearing deposits and the yield on SBA-PPP loans.

PROVISION FOR CREDIT LOSSES

Provision for credit losses was a benefit of $19.6 million for the second quarter of 2021 compared to $20.6 million in expense for the same quarter in 2020. The second quarter of 2021 was favorably impacted by $21.6 million in reserve release driven primarily by continued strong credit performance, low net charge-offs, and improvement in macroeconomic factors. The comparable quarter in 2020 included $14.6 million in reserve build related to uncertainties surrounding COVID-19. Total net charge-offs for the second quarter of 2021 were $2.0 million, a decrease from $7.4 million for the comparable quarter in 2020 due to a lower volume of charge-offs and stable recoveries. The net charge-off ratio was 0.02% for the second quarter of 2021 compared to 0.09% for the same quarter in 2020. Excluding the impact of SBA-PPP loans on average loan balances, the net charge-off ratio was 0.03% for the second quarter of 2021 compared to 0.10% for the same quarter in 2020.

Provision for credit losses was a benefit of $30.6 million for the six months ended June 30, 2021, compared to $48.9 million in expense for the same period in 2020. The six months ended June 30, 2021, was favorably impacted by $35.2 million in reserve release driven primarily by continued strong credit performance, low net charge-offs, and improvement in macroeconomic factors. The comparable period in 2020 included $36.1 million in reserve build related to uncertainties surrounding COVID-19. Total net charge-offs for the six months ended June 30, 2021, were $4.6 million, a decrease from $14.9 million for the comparable period in 2020 due to a lower volume of charge-offs and stable recoveries. The net charge-off ratio was 0.03% for the six months ended June 30, 2021, compared to 0.10% for the same period in 2020. The impact of SBA-PPP loans on average loan balances did not have an impact on the net charge-off ratio for the six months ended June 30, 2021 and 2020.

NONINTEREST INCOME

Noninterest income was $134.2 million for the second quarter of 2021, a decrease of $31.3 million, or by 18.9% compared to $165.4 million for the same quarter in 2020. The primary driver of the decrease was a $52.9 million decline in fair market value adjustments on marketable equity securities. Fair market value adjustments on marketable equity securities were heightened in the second quarter of 2020 as BancShares built up its equity portfolio when the market contracted. As the market started to improve in the second quarter of 2020, BancShares sold a large portion of it to realize the gains. Additionally, there was a $3.9 million decrease in mortgage income due to a decline in gain on sale driven by interest rate movements. These decreases were partially offset by a $9.4 million increase in wealth management services due to increases in annuity fees, assets under management, and advisory and transaction fees, a $4.9 million increase in cardholder services income, net, a $4.4 million increase in service charges on deposit accounts, and a $3.2 million increase in merchant services income, net. Excluding fair market value adjustments on marketable equity securities and realized gains on available for sale securities, noninterest income was $106.7 million for the second quarter of 2021, an increase of $19.6 million, or by 22.5% compared to $87.1 million for the same quarter in 2020.

Noninterest income was $270.8 million for the six months ended June 30, 2021, an increase of $41.4 million, or by 18.0% compared to $229.4 million for the same period in 2020. The primary drivers of the increase were a $15.2 million increase in wealth management services due to increases in annuity fees, assets under management, and advisory and transaction fees, a $14.5 million increase in fair market value adjustments on marketable equity securities, a $6.7 million increase in cardholder services income, net, and a $6.2 million increase in merchant services income, net, and a $3.9 million increase in mortgage income. These increases were partially offset by an $8.5 million decrease in realized gains on available for sale securities. Excluding fair market value adjustments on marketable equity securities and realized gains on available for sale securities, noninterest income was $218.1 million for the six months ended June 30, 2021, an increase of $35.4 million, or by 19.4% compared to $182.7 million for the same period in 2020.

NONINTEREST EXPENSE

Noninterest expense was $301.6 million for the second quarter of 2021, an increase of $9.9 million, or by 3.4% compared to the same quarter in 2020. The primary drivers of the increase were a $7.0 million increase in salaries and wages due to an increase in payroll incentives and a $4.9 million increase in employee benefits due to higher health insurance claims.

Noninterest expense was $597.5 million for the six months ended June 30, 2021, an increase of $5.9 million, or by 1.0% compared to the same period in 2020. The primary drivers of the increase were a $9.6 million increase in salaries and wages due to an increase in payroll incentives, a $7.5 million increase in processing fees paid to third parties as we continue to make investments in our digital and technological capabilities, and a $4.0 million increase in merger-related expense associated with the pending merger with CIT. These increases were partially offset by a $14.4 million decrease in other expense due to a decrease in other pension expense and a $5.6 million decrease in collection and foreclosure-related expenses.

INCOME TAXES

The effective tax rate was 23.1% for the second quarter of 2021 compared to 19.3% for the same quarter in 2020. The effective tax rate was 23.0% for the six months ended June 30, 2021, compared to 20.3% for the same period in 2020.

The effective tax rates for the prior year were favorably impacted by BancShares’ decision to utilize an allowable alternative for computing its 2020 federal income tax liability. The allowable alternative provided BancShares the ability to use the federal income tax rate for certain deductible amounts related to FDIC-assisted acquisitions that was applicable when these amounts were originally subject to tax.

LOANS AND DEPOSITS

At June 30, 2021, loans totaled $32.7 billion, a decrease of $102.3 million, or by 0.6% on an annualized basis since December 31, 2020. Excluding SBA-PPP loans, total loans increased $604.7 million, or by 3.7% on an annualized basis since December 31, 2020.

At June 30, 2021, deposits totaled $48.4 billion, an increase of $5.0 billion, or by 23.1% on an annualized basis since December 31, 2020, driven by organic growth and the effects of government stimulus.

ALLOWANCE FOR CREDIT LOSSES (ACL)

The ACL was $189.1 million at June 30, 2021, compared to $224.3 million at December 31, 2020. The ACL as a percentage of total loans was 0.58% at June 30, 2021, compared to 0.68% at December 31, 2020. The reduction was primarily due to $35.2 million in reserve release for the six months ended June 30, 2021, driven primarily by continued strong credit performance, low net charge-offs, and improvement in macroeconomic factors. Excluding SBA-PPP loans, which have no associated ACL, the ACL as a percentage of total loans was 0.61% as of June 30, 2021, compared to 0.74% as of December 31, 2020.

NONPERFORMING ASSETS

Nonperforming assets, including nonaccrual loans and other real estate owned, were $231.1 million, or 0.71% of total loans and other real estate owned at June 30, 2021, compared to $242.4 million or 0.74% at December 31, 2020. Excluding the impact of SBA-PPP loans on loan balances, the ratio of total nonperforming assets to total loans, leases, and other real estate owned was 0.74% as of June 30, 2021, compared to 0.80% at December 31, 2020.

CAPITAL TRANSACTIONS

During the second quarter of 2021, BancShares did not repurchase any shares of Class A common stock compared to repurchases of 346,000 shares of Class A common stock for $127.0 million at an average cost per share of $367.03 for the comparable quarter in 2020. For the six months ended June 30, 2021, BancShares did not repurchase any shares of Class A common stock compared to repurchases of 695,390 shares of Class A common stock for $286.7 million at an average cost per share of $412.28 for the comparable period in 2020. All Class A common stock repurchases completed in 2020 were consummated under previously approved authorizations. Following the expiration of our latest share repurchase authorization on July 31, 2020, share repurchase activity was suspended.

EARNINGS CALL DETAILS

First Citizens BancShares Inc. will host a conference call to discuss the company’s financial results on August 3, 2021, at 9 a.m. Eastern time.

To access this call, dial:

Domestic:		833-654-8257
International:		602-585-9869
Conference ID:		6592133

The second quarter 2021 earnings presentation and news release will be available on the company’s website at www.firstcitizens.com/investor-relations.

After the conference call, you may access a replay of the call through August 16, 2021, by dialing 855-859-2056 (domestic) or 404-537-3406 (international) with conference ID 6592133.

For investor inquiries, contact Deanna Hart, Investor Relations, at 919-716-2137.

ABOUT FIRST CITIZENS BANCSHARES

BancShares is the financial holding company for Raleigh, North Carolina-headquartered First Citizens Bank. First Citizens Bank provides a broad range of financial services to individuals, businesses, professionals and the medical community through branch offices in 19 states, including digital banking, mobile banking, ATMs and telephone banking. As of June 30, 2021, BancShares had total assets of $55.2 billion.

For more information, visit First Citizens’ website at firstcitizens.com. First Citizens Bank. Forever First^®.

FORWARD-LOOKING STATEMENTS

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the financial condition, results of operations, business plans and future performance of BancShares. Words such as “anticipates,” “believes,” “estimates,” “expects,” “predicts,” “forecasts,” “intends,” “plans,” “projects,” “targets,” “designed,” “could,” “may,” “should,” “will,” “potential,” “continue” or other similar words and expressions are intended to identify these forward-looking statements. These forward-looking statements are based on BancShares’ current expectations and assumptions regarding BancShares’ business, the economy, and other future conditions.

Because forward-looking statements relate to future results and occurrences, they are subject to inherent risks, uncertainties, changes in circumstances and other risk factors that are difficult to predict. Many possible events or factors could affect BancShares’ future financial results and performance and could cause the actual results, performance or achievements of BancShares to differ materially from any anticipated results expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, the impacts of the global COVID-19 pandemic on BancShares’ business and customers, the financial success or changing conditions or strategies of BancShares’ customers or vendors, fluctuations in interest rates, actions of government regulators, the availability of capital and personnel, the delay in closing (or failure to close) one or more of BancShares’ previously announced acquisition transaction(s), the failure to realize the anticipated benefits of BancShares’ previously announced acquisition transaction(s), and general competitive, economic, political, and market conditions, as well as risks related to the proposed transaction with CIT Group Inc (“CIT”) including, in addition to those described above and among others, (1) the risk that the cost savings, any revenue synergies and other anticipated benefits of the proposed transaction may not be realized or may take longer than anticipated to be realized, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the condition of the economy and competitive factors in areas where BancShares and CIT do business, (2) disruption to BancShares’ and CIT’s businesses as a result of the pendency of the proposed transaction and diversion of management’s attention from ongoing business operations and opportunities, (3) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement, (4) the risk that the integration of BancShares’ and CIT’s operations will be materially delayed or will be more costly or difficult than expected or that BancShares and CIT are otherwise unable to successfully integrate their businesses, (5) the outcome of any legal proceedings that may be or have been instituted against BancShares and/or CIT, (6) the failure to obtain required governmental approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction), (7) reputational risk and potential adverse reactions of BancShares’ and/or CIT’s customers, suppliers, employees or other business partners, including those resulting from the announcement or completion of the proposed transaction, (8) the failure of any of the closing conditions in the definitive merger agreement to be satisfied on a timely basis or at all, (9) delays in closing the proposed transaction, (10) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (11) the dilution caused by BancShares’ issuance of additional shares of its capital stock in connection with the proposed transaction, (12) other factors that may affect future results of BancShares and CIT including changes in asset quality and credit risk, the inability to sustain revenue and earnings growth, changes in interest rates and capital markets, inflation, customer borrowing, repayment, investment and deposit practices, the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms, and (13) the impact of the global COVID-19 pandemic on CIT’s business, the parties’ ability to complete the proposed transaction and/or any of the other foregoing risks.

Except to the extent required by applicable laws or regulations, BancShares disclaims any obligation to update forward-looking statements or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. Further information regarding BancShares and factors which could affect the forward-looking statements contained herein can be found in BancShares’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and its other filings with the Securities and Exchange Commission.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, unaudited)	June 30, 2021			December 31, 2020
Assets
Cash and due from banks	$	395,364		$	362,048
Overnight investments	7,871,382			4,347,336
Investment in marketable equity securities (cost of $84,297 at June 30, 2021 and $84,837 at December 31, 2020)	118,540			91,680
Investment securities available for sale (cost of $7,335,745 at June 30, 2021 and $6,911,965 at December 31, 2020)	7,381,083			7,014,243
Investment securities held to maturity (fair value of $3,377,085 at June 30, 2021 and $2,838,499 at December 31, 2020)	3,394,604			2,816,982
Loans held for sale	107,768			124,837
Loans and leases	32,689,652			32,791,975
Allowance for credit losses	(189,094		)	(224,314		)
Net loans and leases	32,500,558			32,567,661
Premises and equipment	1,237,860			1,251,283
Other real estate owned	43,685			50,890
Income earned not collected	133,043			145,694
Goodwill	350,298			350,298
Other intangible assets	47,439			50,775
Other assets	1,593,694			783,953
Total assets	$	55,175,318		$	49,957,680
Liabilities
Deposits:
Noninterest-bearing	$	20,974,111		$	18,014,029
Interest-bearing	27,436,485			25,417,580
Total deposits	48,410,596			43,431,609
Securities sold under customer repurchase agreements	692,604			641,487
Federal Home Loan Bank borrowings	646,667			655,175
Subordinated debt	497,290			504,518
Other borrowings	80,531			88,470
FDIC shared-loss payable	—			15,601
Other liabilities	371,140			391,552
Total liabilities	50,698,828			45,728,412
Shareholders’ equity
Common stock:
Class A – $1 par value (16,000,000 shares authorized; 8,811,220 shares issued and outstanding at June 30, 2021 and December 31, 2020)	8,811			8,811
Class B – $1 par value (2,000,000 shares authorized; 1,005,185 shares issued and outstanding at June 30, 2021 and December 31, 2020)	1,005			1,005
Preferred stock – $0.01 par value (10,000,000 shares authorized; 345,000 shares issued and outstanding at June 30, 2021 and December 31, 2020; $1,000 per share liquidity preference)	339,937			339,937
Retained earnings	4,148,857			3,867,252
Accumulated other comprehensive (loss) income	(22,120		)	12,263
Total shareholders’ equity	4,476,490			4,229,268
Total liabilities and shareholders’ equity	$	55,175,318		$	49,957,680

CONSOLIDATED STATEMENTS OF INCOME

	Three months ended								Six months ended
	June 30,			March 31,			June 30,		June 30,			June 30,
(Dollars in thousands, except per share data, unaudited)	2021			2021			2020		2021			2020
Interest income
Loans and leases	$	324,288		$	323,023		$	326,099	$	647,311		$	651,647
Investment securities interest and dividend income	35,432			30,852			36,605		66,284			76,098
Overnight investments	2,105			1,448			553		3,553			5,071
Total interest income	361,825			355,323			363,257		717,148			732,816
Interest expense
Deposits	8,542			8,793			17,916		17,335			42,110
Securities sold under customer repurchase agreements	356			338			399		694			841
Federal Home Loan Bank borrowings	2,099			2,087			2,472		4,186			5,456
Subordinated debt	4,181			4,188			4,677		8,369			7,432
Other borrowings	254			265			399		519			1,183
Total interest expense	15,432			15,671			25,863		31,103			57,022
Net interest income	346,393			339,652			337,394		686,045			675,794
Provision (credit) for credit losses	(19,603		)	(10,974		)	20,552		(30,577		)	48,907
Net interest income after provision for credit losses	365,996			350,626			316,842		716,622			626,887
Noninterest income
Wealth management services	31,753			32,198			22,371		63,951			48,783
Service charges on deposit accounts	21,883			21,536			17,522		43,419			43,935
Cardholder services, net	22,471			19,960			17,587		42,431			35,747
Mortgage income	5,929			12,991			9,811		18,920			15,035
Merchant services, net	8,532			8,917			5,363		17,449			11,251
Other service charges and fees	8,959			8,489			7,145		17,448			14,937
Insurance commissions	3,704			3,998			3,189		7,702			6,877
ATM income	1,571			1,482			1,395		3,053			2,817
Marketable equity securities gains, net	11,654			16,011			64,570		27,665			13,162
Realized gains on investment securities available for sale, net	15,830			9,207			13,752		25,037			33,547
Other	1,864			1,860			2,697		3,724			3,322
Total noninterest income	134,150			136,649			165,402		270,799			229,413
Noninterest expense
Salaries and wages	153,643			147,830			146,633		301,473			291,888
Employee benefits	35,298			35,725			30,364		71,023			68,875
Occupancy expense	28,439			29,743			29,556		58,182			57,036
Equipment expense	28,902			29,803			28,774		58,705			56,624
Processing fees paid to third parties	14,427			13,673			10,186		28,100			20,558
FDIC insurance expense	3,382			3,218			3,731		6,600			7,197
Collection and foreclosure-related expenses	173			2,198			3,949		2,371			8,003
Merger-related expenses	5,769			6,819			4,369		12,588			8,601
Other	31,545			26,917			34,117		58,462			72,868
Total noninterest expense	301,578			295,926			291,679		597,504			591,650
Income before income taxes	198,568			191,349			190,565		389,917			264,650
Income taxes	45,780			44,033			36,779		89,813			53,695
Net income	$	152,788		$	147,316		$	153,786	$	300,104		$	210,955
Preferred stock dividends	4,636			4,636			4,790		9,272			4,790
Net income available to common shareholders	$	148,152		$	142,680		$	148,996	$	290,832		$	206,165
Weighted average common shares outstanding	9,816,405			9,816,405			10,105,520		9,816,405			10,289,320
Earnings per common share	$	15.09		$	14.53		$	14.74	$	29.63		$	20.04
Dividends declared per common share	0.47			0.47			0.40		0.94			0.80

SELECTED QUARTERLY RATIOS

	Three months ended
	June 30, 2021			March 31, 2021			June 30, 2020
SELECTED RATIOS
Book value per share at period-end	$	421.39		$	405.59		$	367.57
Annualized return on average assets	1.13		%	1.16		%	1.36		%
Annualized return on average equity	14.64			14.70			16.43
Total risk-based capital ratio	14.2			14.1			13.6
Tier 1 risk-based capital ratio	12.1			12.0			11.4
Common equity Tier 1 ratio	11.1			11.0			10.3
Tier 1 leverage capital ratio	7.7			7.8			8.1

ALLOWANCE FOR CREDIT LOSSES AND ASSET QUALITY DISCLOSURES

	Three months ended
(Dollars in thousands, unaudited)	June 30, 2021			March 31, 2021			June 30, 2020
ALLOWANCE FOR CREDIT LOSSES ⁽¹⁾
ACL at beginning of period	$	210,651		$	224,314		$	209,259
Provision for credit losses	(19,603		)	(10,974		)	20,552
Net charge-offs of loans and leases:
Charge-offs	(7,528		)	(8,563		)	(12,064		)
Recoveries	5,574			5,874			4,703
Net charge-offs of loans and leases	(1,954		)	(2,689		)	(7,361		)
ACL at end of period	$	189,094		$	210,651		$	222,450
ACL at end of period allocated to:
PCD	$	18,740		$	22,935		$	26,928
Non-PCD	170,354			187,716			195,522
ACL at end of period	$	189,094		$	210,651		$	222,450
Reserve for unfunded commitments	$	11,103		$	11,571		$	13,685
SELECTED LOAN DATA
Average loans and leases:
PCD	$	414,183		$	454,521		$	546,998
Non-PCD	32,628,109			32,515,793			30,992,001
Loans and leases at period-end:
PCD	396,506			432,773			530,651
Non-PCD	32,293,146			32,748,078			31,887,774
RISK ELEMENTS
Nonaccrual loans and leases	$	187,464		$	194,534		$	197,791
Other real estate owned	43,685			48,512			53,850
Total nonperforming assets	$	231,149		$	243,046		$	251,641
Accruing loans and leases 90 days or more past due	$	3,776		$	7,377		$	3,796
RATIOS
Net charge-offs (annualized) to average loans and leases	0.02		%	0.03		%	0.09		%
ACL to total loans and leases⁽²⁾:
PCD	4.73			5.30			5.07
Non-PCD	0.53			0.57			0.61
Total	0.58			0.63			0.69
Ratio of total nonperforming assets to total loans, leases and other real estate owned	0.71			0.73			0.77

⁽¹⁾BancShares recorded no ACL on investment securities as of June 30, 2021, December 31, 2020, or June 30, 2020.

⁽²⁾ Loans originated in relation to the SBA-PPP do not have a recorded ACL. As of June 30, 2021, the ratio of ACL to total Non-PCD loans excluding SBA-PPP loans was 0.56% while the ratio of ACL to total loans excluding SBA-PPP loans was 0.61%. As of December 31, 2020, the ratio of ACL to total Non-PCD loans excluding SBA-PPP loans was 0.67% while the ratio of ACL to total loans excluding SBA-PPP loans was 0.74%.

AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN

	Three months ended
	June 30, 2021							March 31, 2021							June 30, 2020
	Average					Yield/		Average					Yield/		Average					Yield/
(Dollars in thousands, unaudited)	Balance			Interest		Rate ⁽²⁾		Balance			Interest		Rate ⁽²⁾		Balance			Interest		Rate ⁽²⁾
INTEREST-EARNING ASSETS
Loans and leases ⁽¹⁾	$	33,166,049		$	324,891	3.89	%	$	33,086,656		$	323,602	3.92	%	$	31,635,958		$	326,618	4.10	%
Investment securities:
U.S. Treasury	—			—		—		383,300			171		0.18		206,575			679		1.32
Government agency	839,614			1,966		0.94		791,293			1,900		0.96		657,405			1,428		0.87
Mortgage-backed securities	8,968,779			25,273		1.13		7,882,679			20,607		1.05		7,555,947			28,532		1.51
Corporate bonds	612,516			7,806		5.10		602,883			7,742		5.14		299,250			3,782		5.06
Other investments	113,439			426		1.51		97,495			472		1.96		209,290			2,236		4.30
Total investment securities	10,534,348			35,471		1.35		9,757,650			30,892		1.27		8,928,467			36,657		1.64
Overnight investments	7,819,287			2,105		0.11		5,870,973			1,448		0.10		2,231,356			553		0.10
Total interest-earning assets	$	51,519,684		$	362,467	2.80		$	48,715,279		$	355,942	2.93		$	42,795,781		$	363,828	3.38
Cash and due from banks	364,303							333,069							404,517
Premises and equipment	1,242,700							1,251,542							1,260,566
Allowance for credit losses	(211,913		)					(224,009		)					(209,973		)
Other real estate owned	46,074							48,590							55,554
Other assets	1,438,483							1,285,163							1,247,057
Total assets	$	54,399,331						$	51,409,634						$	45,553,502
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Checking with interest	$	10,952,753		$	1,504	0.06	%	$	10,746,225		$	1,409	0.05	%	$	8,562,145		$	1,310	0.06	%
Savings	3,796,686			326		0.03		3,461,780			299		0.04		2,846,557			312		0.04
Money market accounts	9,581,775			2,634		0.11		9,008,391			2,508		0.11		7,618,883			6,519		0.34
Time deposits	2,672,900			4,078		0.61		2,805,317			4,577		0.66		3,398,979			9,775		1.16
Total interest-bearing deposits	27,004,114			8,542		0.13		26,021,713			8,793		0.14		22,426,564			17,916		0.32
Securities sold under customer repurchase agreements	677,451			356		0.21		641,236			338		0.21		659,244			399		0.24
Other short-term borrowings	—			—		—		—			—		—		45,549			248		2.16
Long-term borrowings	1,227,755			6,534		2.12		1,235,576			6,540		2.12		1,275,928			7,300		2.26
Total interest-bearing liabilities	28,909,320			$	15,432	0.21		27,898,525			$	15,671	0.23		24,407,285			$	25,863	0.42
Demand deposits	20,746,989							18,836,485							16,719,851
Other liabilities	344,849							399,420							438,141
Shareholders’ equity	4,398,173							4,275,204							3,988,225
Total liabilities and shareholders’ equity	$	54,399,331						$	51,409,634						$	45,553,502
Interest rate spread						2.59	%						2.70	%						2.96	%
Net interest income and net yield on interest-earning assets				$	347,035	2.68	%				$	340,271	2.80	%				$	337,965	3.14	%

⁽¹⁾ Loans and leases include PCD and non-PCD loans, nonaccrual loans and loans held for sale.

⁽²⁾Yields related to loans, leases and securities exempt from both federal and state income taxes, federal income taxes only, or state income taxes only are stated on a taxable-equivalent basis assuming statutory federal income tax rates of 21.0% for all periods presented, as well as state income tax rates of 3.3% for the three months ended June 30, 2021 and March 31, 2021, and 3.4% for the three months ended June 30, 2020. The taxable-equivalent adjustment was $642 thousand, $619 thousand, and $571 thousand for the three months ended June 30, 2021, March 31, 2021, and June 30, 2020, respectively.

Contact:		Barbara Thompson Corporate Communications 919-716-2716		Deanna Hart Investor Relations 919-716-2137

August 3, 2021 6:34 am

Eaton Reports Record Second Quarter 2021 Results, Raises 2021 Outlook

Eaton Reports Record Second Quarter 2021 Results, Raises 2021 Outlook

Eaton Reports Second Quarter Earnings Per Share of $1.26 and Record Second Quarter Adjusted Earnings Per Share of $1.72, Up 98% Over the Second Quarter of 2020

Record Second Quarter Segment Marginsof 18.6%, 390 Basis Points Above the Second Quarter of 2020

Raising Adjusted Earnings Per Share Guidance for 2021 to $6.73 at the Midpoint, Up 37% Over 2020

Raising Full Year 2021 Operating Cash Flow by $200 Million Above Previous Guidance at the Midpoint

DUBLIN–(BUSINESS WIRE)–
Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.26 for the second quarter of 2021. Excluding charges of $0.25 per share related to intangible amortization, $0.18 per share related to acquisitions and divestitures, and $0.03 per share related to a multi-year restructuring program, adjusted earnings per share were a second quarter record of $1.72, up 98% over the second quarter of 2020 and up 19% over the first quarter of 2021.

Sales in the second quarter of 2021 were $5.2 billion, up 35% from the second quarter of 2020. The sales increase consisted of 27% growth in organic sales, 5% growth from acquisitions, and 3% from positive currency translation.

Craig Arnold, Eaton chairman and chief executive officer, said, “Building on the momentum from the first quarter, we achieved strong performance in the second quarter. We delivered record second quarter adjusted earnings per share and segment margins, and organic sales were slightly above the midpoint of our guidance range despite supply chain constraints impacting many of our businesses. We are pleased with how well our businesses are executing in this environment.”

Second quarter segment margins were 18.6% and up 390 basis points over the second quarter of 2020. This result was above the high end of our guidance range, and a second quarter record. These strong segment margins were driven by effectively managing supply chain constraints, increased productivity and continued benefits from the multi-year restructuring program announced in the second quarter of 2020.

Operating cash flow in the second quarter of 2021 was stronger than expected at $637 million and free cash flow was $484 million.

During the quarter, we continued to improve our portfolio of businesses. The company closed the acquisition of Cobham Mission Systems, and the acquisition of a 50% stake in Jiangsu YiNeng Electric’s busway business in China, adding new products and growth opportunities for the Aerospace and Electrical Global segments. The Hydraulics sale to Danfoss closed August 2.

“Driven by strong second quarter performance and anticipated higher organic sales for the remainder of the year, we now expect 2021 adjusted earnings per share to be between $6.58 and $6.88, up 37% at the midpoint over 2020,” said Arnold. “Additionally, we expect 2021 full year adjusted operating cash flow to be between $2.6 billion and $2.8 billion, up $200 million at the midpoint over our previous guidance. Finally, for the third quarter of 2021, we anticipate adjusted earnings per share to be between $1.72 and $1.82.”

Business Segment Results

Sales for the Electrical Americas segment were $1.8 billion, up 24% from the second quarter of 2020. Organic sales were up 15%, the acquisition of Tripp Lite added 8%, and positive currency translation added 1%. Operating profits were $393 million, up 28% from the second quarter of 2020. Operating margins of 21.3% were a second quarter record, up 60 basis points over the second quarter of 2020 and up 190 basis points over the second quarter of 2019.

The twelve-month rolling average of orders in the second quarter was up 13%, with particular strength in data center and residential markets. Orders increased 43% over the second quarter of 2020 and 14% over the first quarter of 2021. Backlog at the end of June was a new record and up 43% over June 2020.

Sales for the Electrical Global segment were $1.4 billion, up 28% over the second quarter of 2020. Organic sales were up 22% and positive currency translation added 6%. Operating profits were $259 million, up 46% over the second quarter of 2020. Operating margins of 18.3% were a second quarter record and up 230 basis points over the second quarter of 2020.

The twelve-month rolling average of orders in the second quarter was up 10%, driven by data center, utility and residential markets. During the second quarter, the business experienced strong order growth of 46% over the second quarter of 2020 and 9% over the first quarter of 2021. The June backlog grew 50% over June 2020 and was also a new record.

Aerospace segment sales were $625 million, up 36% from the second quarter of 2020. Organic sales were up 17%, the acquisition of Cobham Mission Systems added 16%, and positive currency translation added 3%. Operating profits were $131 million, up 93% from the second quarter of 2020. Operating margins in the quarter were 21%, up 620 basis points over the second quarter of 2020.

The twelve-month rolling average of orders in the second quarter was down 16%, driven by the downturn in commercial markets. On an organic basis, backlog at the end of June was flat to June 2020. Sequentially, organic orders were up 12% compared to the first quarter of 2021.

The Vehicle segment posted sales of $675 million, up 106% over the second quarter of 2020. Organic sales were up 103% and positive currency translation added 3%. Operating profits were $121 million with operating margins of 17.9%, compared to a loss of $21 million in the second quarter of 2020.

eMobility segment sales were $88 million, up 57% over the second quarter of 2020, driven by organic sales growth of 54% and positive currency translation of 3%. The segment recorded an operating loss of $6 million reflecting continued investment in research and development and ramp up costs associated with new program wins.

Eaton’s mission is to improve the quality of life and the environment through the use of power management technologies and services. We provide sustainable solutions that help our customers effectively manage electrical, hydraulic, and mechanical power – more safely, more efficiently, and more reliably. Eaton’s 2020 revenues were $17.9 billion, and we sell products to customers in more than 175 countries. We have approximately 85,000 employees. For more information, visit www.eaton.com.

Notice of conference call: Eaton’s conference call to discuss its second quarter results is available to all interested parties as a live audio webcast today at 11 a.m. United States Eastern Time via a link on Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on second quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning third quarter and full year 2021 adjusted earnings per share, expected costs and benefits associated with restructuring actions, as well as full year 2021 organic sales and adjusted operating cash flow. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic globally and government actions related thereto; unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; unanticipated changes in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company’s comparative financial results for the six months ended June 30, 2021, are available on the company’s website, www.eaton.com.

EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF INCOME

	Three months ended June 30						Six months ended June 30
	Three months ended June 30						Six months ended June 30
(In millions except for per share data)	2021			2020			2021			2020
Net sales	$	5,215		$	3,856		$	9,907		$	8,645

Cost of products sold	3,545			2,877			6,729			6,179
Selling and administrative expense	876			691			1,671			1,556
Research and development expense	154			126			302			279
Interest expense – net	37			38			75			72
Gain on sale of business	—			—			—			221
Other (income) expense – net	(17		)	77			(28		)	112
Income before income taxes	620			47			1,158			668
Income tax expense (benefit)	114			(7		)	193			176
Net income	506			54			965			492
Less net income for noncontrolling interests	—			(3		)	(1		)	(3		)
Net income attributable to Eaton ordinary shareholders	$	506		$	51		$	964		$	489

Net income per share attributable to Eaton ordinary shareholders
Diluted	$	1.26		$	0.13		$	2.40		$	1.20
Basic	1.27			0.13			2.42			1.21

Weighted-average number of ordinary shares outstanding
Diluted	401.4			401.3			401.2			406.2
Basic	398.8			400.4			398.6			404.8

Cash dividends declared per ordinary share	$	0.76		$	0.73		$	1.52		$	1.46

Reconciliation of net income attributable to Eaton ordinary shareholders to adjusted earnings
Net income attributable to Eaton ordinary shareholders	$	506		$	51		$	964		$	489
Excluding acquisition and divestiture charges, after-tax	72			80			109			89
Excluding restructuring program charges, after-tax	11			148			23			148
Excluding intangible asset amortization expense, after-tax	101			67			171			134
Adjusted earnings	$	690		$	346		$	1,267		$	860

Net income per share attributable to Eaton ordinary shareholders – diluted	$	1.26		$	0.13		$	2.40		$	1.20
Excluding per share impact of acquisition and divestiture charges, after-tax	0.18			0.20			0.27			0.22
Excluding per share impact of restructuring program charges, after-tax	0.03			0.37			0.06			0.37
Excluding per share impact of intangible asset amortization expense, after-tax	0.25			0.17			0.43			0.33
Adjusted earnings per ordinary share	$	1.72		$	0.87		$	3.16		$	2.12

See accompanying notes.

EATON CORPORATION plc
BUSINESS SEGMENT INFORMATION

	Three months ended June 30						Six months ended June 30
	Three months ended June 30						Six months ended June 30
(In millions)	2021			2020			2021			2020
Net sales
Electrical Americas	$	1,849		$	1,490		$	3,471		$	3,278
Electrical Global	1,418			1,111			2,671			2,255
Hydraulics	560			411			1,121			918
Aerospace	625			461			1,144			1,141
Vehicle	675			327			1,329			925
eMobility	88			56			171			128
Total net sales	$	5,215		$	3,856		$	9,907		$	8,645

Segment operating profit (loss)
Electrical Americas	$	393		$	308		$	725		$	616
Electrical Global	259			178			472			344
Hydraulics	73			37			157			92
Aerospace	131			68			227			215
Vehicle	121			(21		)	234			60
eMobility	(6		)	(2		)	(13		)	(1		)
Total segment operating profit	971			568			1,802			1,326

Corporate
Intangible asset amortization expense	(108		)	(88		)	(200		)	(175		)
Interest expense – net	(37		)	(38		)	(75		)	(72		)
Pension and other postretirement benefits income (expense)	16			(12		)	30			(20		)
Restructuring program charges	(13		)	(187		)	(29		)	(187		)
Other expense – net	(209		)	(196		)	(370		)	(204		)
Income before income taxes	620			47			1,158			668
Income tax expense (benefit)	114			(7		)	193			176
Net income	506			54			965			492
Less net income for noncontrolling interests	—			(3		)	(1		)	(3		)
Net income attributable to Eaton ordinary shareholders	$	506		$	51		$	964		$	489

See accompanying notes.

EATON CORPORATION plc
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2021		December 31, 2020
(In millions)
Assets
Current assets
Cash	$	279	$	438
Short-term investments	261		664
Accounts receivable – net	3,341		2,904
Inventory	2,668		2,109
Assets held for sale	2,604		2,487
Prepaid expenses and other current assets	636		576
Total current assets	9,789		9,178

Property, plant and equipment – net	3,058		2,964

Other noncurrent assets
Goodwill	14,880		12,903
Other intangible assets	6,195		4,175
Operating lease assets	470		428
Deferred income taxes	445		426
Other assets	1,967		1,750
Total assets	$	36,804	$	31,824

Liabilities and shareholders’ equity
Current liabilities
Short-term debt	$	3,373	$	1
Current portion of long-term debt	8		1,047
Accounts payable	2,484		1,987
Accrued compensation	425		351
Liabilities held for sale	527		468
Other current liabilities	2,089		2,027
Total current liabilities	8,906		5,881

Noncurrent liabilities
Long-term debt	8,721		7,010
Pension liabilities	1,085		1,588
Other postretirement benefits liabilities	322		330
Operating lease liabilities	366		326
Deferred income taxes	494		277
Other noncurrent liabilities	1,460		1,439
Total noncurrent liabilities	12,448		10,970

Shareholders’ equity
Eaton shareholders’ equity	15,408		14,930
Noncontrolling interests	42		43
Total equity	15,450		14,973
Total liabilities and equity	$	36,804	$	31,824

See accompanying notes.

EATON CORPORATION plc

NOTES TO THE SECOND QUARTER 2021 EARNINGS RELEASE

Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution).

Note 1. NON-GAAP FINANCIAL INFORMATION

This earnings release includes certain non-GAAP financial measures. These financial measures include adjusted earnings, adjusted earnings per ordinary share, adjusted operating cash flow, and free cash flow, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. During the first quarter of 2021, the Company revised its definition of adjusted earnings to exclude intangible asset amortization expense and prior periods have been retrospectively adjusted to apply this change. Management believes that these financial measures are useful to investors because they exclude certain transactions, allowing investors to more easily compare Eaton Corporation plc’s (Eaton or the Company) financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.

The Company’s third quarter and full year adjusted earnings results for 2020, first quarter adjusted earnings results for 2021, and guidance for 2021, excluding the impact of the gain from the sale of the Hydraulics business, follows:

	Three months ended March 31		Three months ended September 30			Year ended December 31
	2021		2020		2021	2020		2021
	Results		Results		Guidance	Results		Guidance
Net income per share attributable to Eaton ordinary shareholders – diluted	$	1.14	$	1.11	$1.23 – $1.33	$	3.49	$4.94 – $5.24
Excluding per share impact of acquisition and divestiture charges, after-tax	0.09		0.05		0.19	0.33		0.57
Excluding per share impact of restructuring program charges, after-tax	0.03		0.02		0.06	0.42		0.17
Excluding per share impact of intangible amortization expense, after-tax	0.18		0.17		0.24	0.67		0.90
Adjusted earnings per ordinary share	$	1.44	$	1.35	$1.72 – $1.82	$	4.91	$6.58 – $6.88

A reconciliation of operating cash flow to free cash flow follows:

	Three months ended June 30, 2021
Operating cash flow	$	637
Capital expenditures for property, plant and equipment	(153		)
Free cash flow	$	484

The Company’s full year adjusted operating cash flow guidance for 2021 follows:

	2021 Guidance ($ Billions)
	Low		High
Operating cash flow	$	1.95	$	2.15
Estimated cash taxes on Hydraulics sale	0.45		0.45
U.S. qualified pension plan contribution	0.20		0.20
Adjusted operating cash flow	$	2.6	$	2.8

Note 2. ACQUISITIONS AND DIVESTITURES OF BUSINESSES

Sale of Hydraulics business

On August 2, 2021, Eaton sold its Hydraulics business to Danfoss A/S, a Danish industrial company, for $3.3 billion. Eaton’s Hydraulics business is a global leader in hydraulics components, systems, and services for industrial and mobile equipment. The business had sales of $1.8 billion in 2020. During the first quarter of 2020, the Company determined the Hydraulics business met the criteria to be classified as held for sale. Therefore, assets and liabilities of the business have been presented as held for sale in the Consolidated Balance Sheets as of December 31, 2020 and June 30, 2021.

Acquisition of a 50% stake in Jiangsu YiNeng Electric’s busway business

On June 25, 2021, Eaton acquired a 50 percent stake in Jiangsu YiNeng Electric’s busway business, which manufactures and markets busway products in China and had sales of $60 in 2020. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Acquisition of Cobham Mission Systems

On June 1, 2021, Eaton acquired Cobham Mission Systems (CMS) for $2.80 billion, net of cash received. CMS is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. CMS had sales of over $700 in 2020. CMS is reported within the Aerospace business segment.

Acquisition of a 50% stake in HuanYu High Tech

On March 29, 2021, Eaton acquired a 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region. HuanYu High Tech had 2019 sales of $106 and has production operations in Wenzhou, China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Acquisition of Green Motion SA

On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $105, including $49 of cash paid at closing and $56 of estimated fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, with a maximum possible undiscounted value of $109. Green Motion SA is reported within the Electrical Global business segment.

Acquisition of Tripp Lite

On March 17, 2021, Eaton acquired Tripp Lite for $1.65 billion, net of cash received. Tripp Lite is a leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas. Tripp Lite had sales of over $400 in 2020. Tripp Lite is reported within the Electrical Americas business segment.

Sale of Lighting business

On March 2, 2020, Eaton sold its Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. As a result of the sale, the Company recognized a pre-tax gain of $221 in 2020. The Lighting business, which had sales of $1.6 billion in 2019 as part of the Electrical Americas business segment, served customers in commercial, industrial, residential, and municipal markets.

Note 3. ACQUISITION AND DIVESTITURE CHARGES

Eaton incurs integration charges and transaction costs to acquire businesses, and transaction costs and other charges to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items follows:

	Three months ended June 30						Six months ended June 30
	2021			2020			2021			2020
Acquisition integration, divestiture charges and transaction costs	$	87		$	103		$	133		$	235
Gain on the sale of the Lighting business	—			—			—			(221		)
Total before income taxes	87			103			133			14
Income tax expense (benefit)	(15		)	(23		)	(24		)	75
Total after income taxes	$	72		$	80		$	109		$	89
Per ordinary share – diluted	$	0.18		$	0.20		$	0.27		$	0.22

Acquisition integration, divestiture charges and transaction costs in 2021 are primarily related to the divestiture of the Hydraulics business, the acquisitions of Tripp Lite, Cobham Mission Systems, Souriau-Sunbank Connection Technologies, and Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S., and other charges to exit businesses. Charges in 2020 are primarily related to the divestitures of the Hydraulics business and the Lighting business, the acquisitions of Souriau-Sunbank and Ulusoy Elektrik, and other charges to exit businesses. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, Interest expense – net, or Other (income) expense – net. In Business Segment Information, these charges were included in Other expense – net.

Note 4. RESTRUCTURING CHARGES

In the second quarter of 2020, Eaton decided to undertake a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions. Restructuring charges incurred under this program were $214 in 2020 and $29 for the six months ended June 30, 2021. These restructuring activities are expected to incur additional expenses of $32 in 2021, and $5 in 2022, primarily comprised of plant closing costs and other costs, resulting in total estimated charges of $280 for the entire program.

A summary of restructuring program charges follows:

	Three months ended June 30					Six months ended June 30
	2021			2020		2021		2020
Workforce reductions	$	(2	)	$	166	$	—	$	166
Plant closing and other	15			21		29		21
Total before income taxes	13			187		29		187
Income tax benefit	2			39		6		39
Total after income taxes	$	11		$	148	$	23	$	148
Per ordinary share – diluted	$	0.03		$	0.37	$	0.06	$	0.37

Restructuring program charges related to the following segments:

	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Electrical Americas	$	3	$	13	$	8	$	13
Electrical Global	—		51		2		51
Aerospace	2		30		3		30
Vehicle	5		90		11		90
eMobility	1		1		1		1
Corporate	2		2		4		2
Total	$	13	$	187	$	29	$	187

These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other (income) expense – net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. The projected mature year savings from these restructuring actions are expected to be $200 when fully implemented in 2023.

Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE

Intangible asset amortization expense follows:

	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Intangible asset amortization expense	$	108	$	88	$	200	$	175
Income tax benefit		7		21	29		41
Total after income taxes	$	101	$	67	$	171	$	134
Per ordinary share – diluted	$	0.25	$	0.17	$	0.43	$	0.33

View source version on businesswire.com: https://www.businesswire.com/news/home/20210803005538/en/

Eaton Corporation plc

Jennifer Tolhurst, Media Relations, +1 (440) 523-4006

[email protected]

or

Yan Jin, Investor Relations, +1 (440) 523-7558

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August 3, 2021 6:34 am

Clorox Reports Fourth Quarter and Fiscal Year 2021 Results, Provides Fiscal Year 2022 Outlook

PR Newswire

OAKLAND, Calif., Aug. 3, 2021 /PRNewswire/ — The Clorox Company (NYSE: CLX) reported a 9% sales decrease and a 68% decrease in diluted net earnings per share (diluted EPS) for its fourth quarter, which ended June 30, 2021. For fiscal year 2021, the company reported sales growth of 9% and a 24% decrease in diluted EPS.

“Fiscal year 2021 was an extraordinary year for Clorox, with the pandemic putting us through the test of volatility, including rapid changes in consumer demand and inflationary pressure, which is reflected in our fourth quarter results,” said CEO Linda Rendle. “It reinforced the strength of our global portfolio, which has never been more relevant to consumers. And it showed the opportunity to accelerate our IGNITE strategy to capitalize on changing consumer trends, differentiate Clorox and win in our categories.

“In the face of a challenging environment, we continued to advance our IGNITE strategy and key priorities, including doubling our innovation investment and delivering over $120 million in cost savings in the fiscal year. We made progress on expanding production capacity, achieving our highest case fill rate since the start of the pandemic, which contributed to market share gains across the vast majority of our businesses. Our investments in e-commerce, data-driven personalization and innovation are also paying off. We’ve nearly doubled our e-commerce business in the past two years, we’re experiencing higher levels of consumer engagement and our innovation has become an increasingly meaningful contributor to top-line growth.

“As we head into fiscal year 2022, we’re laser focused on operational execution, rebuilding our margins and driving market share improvements in this dynamic environment. We’re also making key multiyear investments to accelerate our digital transformation and strengthen our capabilities and brands to drive profitable growth over the long term.”

This press release includes some non-GAAP financial measures. See “Non-GAAP Financial Information” at the end of this press release for more information.

Fiscal Fourth Quarter Results

Following is a summary of key fourth quarter results. All comparisons are with the fourth quarter of fiscal year 2020, unless otherwise stated.

9% sales decrease (10% organic sales¹ decrease)
78 cents diluted EPS (68% decrease versus year-ago quarter)
95 cents adjusted EPS² (61% decrease versus year-ago quarter)

In the fourth quarter, sales were down 9%, with decreases in three of four reportable segments. Organic sales were down 10% for the quarter. On a two-year stack basis, Clorox generated sales growth of 13%. The sales decreases were due primarily to the deceleration of shipments from peak levels during the COVID-19 pandemic, including more rapid than expected deceleration in the Health and Wellness segment. Fourth quarter sales were also negatively impacted by unfavorable price mix driven by supply improvements, which led to broader product assortment with the reintroduction of value packs. These factors were partially offset by 1 point of benefit from the July 2020 acquisition of a majority share in the company’s joint venture in the Kingdom of Saudi Arabia.


¹ Organic sales growth/(decrease) is a non-GAAP measure. See “Non-GAAP Financial Information” at the end of this press release, including the reconciliation of organic sales growth/(decrease) to net sales growth/(decrease), the most comparable GAAP measure.

² Adjusted EPS is a non-GAAP measure. See “Non-GAAP Financial Information” at the end of this press release, including the reconciliation of adjusted EPS to diluted EPS, the most comparable GAAP measure.

The company’s fourth quarter gross margin decreased by 970 basis points to 37.1% from 46.8% in the year-ago quarter. Gross margin performance was driven by higher manufacturing and logistics costs, increased commodity costs due to significant cost inflation, decreasing sales resulting in lower manufacturing fixed-cost absorption and unfavorable price mix, partially offset by the benefits of cost savings initiatives.

Clorox delivered earnings of $97 million, or 78 cents diluted EPS, compared to $310 million, or $2.41 diluted EPS, in the year-ago quarter, representing a 68% decrease in diluted earnings per share. Fourth quarter diluted EPS reflects a pre-tax noncash charge of $28 million, or 17 cents, in connection with investments and related arrangements made with a Professional Products business unit supplier. Excluding this charge, Clorox delivered diluted net earnings per share (adjusted EPS) of 95 cents, a 61% decrease versus the year-ago quarter, primarily reflecting lower sales, higher manufacturing and logistics costs, and increased commodity costs, partially offset by the benefit of cost savings initiatives.

Key Segment Results

Following is a summary of key fourth quarter results by reportable segment. All comparisons are with the fourth quarter of fiscal year 2020, unless otherwise stated.

Health and Wellness (Cleaning; Professional Products; Vitamins, Minerals and Supplements)

17% sales decrease
104% pretax earnings decrease (93% adjusted segment pretax earnings decrease³)

Sales decreased in two of three businesses, primarily reflecting lower shipments of cleaning and disinfecting products in both the retail and professional channels as consumer demand decelerated. Segment sales results were also impacted by negative product mix from the normalization of supply. Pretax earnings were down due to lower sales, gross margin contraction, higher advertising investments and the noncash charge to the Professional Products business.

Household (Bags and Wraps, Grilling, Cat Litter)

8% sales decrease
31% pretax earnings decrease

The segment had lower sales in two of three businesses – Bags and Wraps as well as Grilling – driven by unfavorable price mix and decreased shipments from moderating consumer demand. Pretax earnings decreased due to lower sales and higher manufacturing and logistics costs.

Lifestyle (Food, Water Filtration, Natural Personal Care)

3% sales decrease
22% pretax earnings decrease

Sales decreased in two of three businesses from unfavorable price mix and lower shipments in Water Filtration and Food from moderating consumer demand. Pretax earnings decreased, primarily due to higher manufacturing and logistics costs and lower sales.

International (Sales Outside the U.S.)

5% sales increase (1% organic sales decrease)
70% pretax earnings increase

Segment sales increased, driven by the benefit of higher shipments from the acquisition of a majority share in the company’s Saudi joint venture. Pretax earnings increased due to higher sales and gross margin expansion.


³ Adjusted segment pretax earnings decrease is a non-GAAP measure. See “Non-GAAP Financial Information” at the end of this press release, including the reconciliation to the most comparable GAAP measure.

Fiscal Year 2021 Results

Following is a summary of key fiscal year 2021 results:

9% sales growth (9% organic sales growth)
$5.58 diluted EPS (24% decrease)
$7.25 adjusted EPS (2% decrease)

In fiscal year 2021, Clorox delivered 9% sales growth, driven primarily by higher shipments due to COVID-19 across all reportable segments. Organic sales were up 9% for the year.

Fiscal year gross margin decreased by 200 basis points to 43.6% from 45.6% in the year-ago period. The decrease was driven by higher manufacturing and logistics costs and increased commodity costs, which were partially offset by strong volume growth, the benefit of robust cost savings and the impact of lower trade promotion spending.

Clorox delivered earnings of $710 million, or $5.58 diluted EPS, compared to $939 million, or $7.36 diluted EPS, in the year-ago period, representing a 24% decrease in diluted EPS. Excluding the noncash items, adjusted EPS was $7.25, representing a 2% decrease. Adjusted EPS results primarily reflect higher manufacturing and logistics costs, partially offset by increased shipments across all four segments.

Net cash provided by operations was $1.3 billion in fiscal year 2021, compared to $1.5 billion in fiscal year 2020, representing a 17% decrease.

Clorox Provides Fiscal Year 2022 Outlook

2% to 6% decrease in sales (2% to 6% decrease in organic sales)
$5.05 to $5.35 diluted EPS range (9% to 4% decrease versus year ago)
$5.40 to $5.70 adjusted EPS range (26% to 21% decrease versus year ago)
Excludes the strategic investment in digital capabilities and productivity enhancements detailed below.
Gross margin down by 300 to 400 basis points

Starting in fiscal year 2022, Clorox expects to invest approximately $500 million over the next five years, including about $90 million in fiscal year 2022, in its digital capabilities and productivity enhancements. This investment will include replacing the enterprise resource planning system, which will generate efficiencies and better position the company in supply chain, digital commerce, innovation and brand building over the long term. Of the $90 million to be invested in fiscal year 2022, about $55 million, or 35 cents, will flow through to the profit and loss statement, mostly in selling and administrative expenses.

The company’s outlook reflects the following current assumptions:

Clorox’s 2022 fiscal year sales are projected to be down 2% to 6%, reflecting lower sales in the first half – from the high single digits to low double digits – due to comparisons to 27% sales growth in the first half of fiscal year 2021. In the second half of the fiscal year, sales are expected to normalize toward the lower end of the company’s long-term sales growth target of 3% to 5%. The company expects the largest factor impacting its sales performance in fiscal year 2022 to be consumer demand, which remains uncertain. Fiscal year organic sales are projected to be down 2% to 6%.

Gross margin for the fiscal year is expected to be down 300 to 400 basis points, primarily due to higher commodity costs and manufacturing and logistics costs, most notably in transportation. These headwinds are expected to be more pronounced in the first quarter, when the company will also be lapping modern record gross margin with higher manufacturing fixed-cost absorption. The company expects sequential improvement in gross margin over the course of the fiscal year, with the assumption of a return to gross margin expansion in the fourth quarter. This assumption is based on the expectation that cost inflation will begin to moderate and that mitigating actions put into place will begin to flow through results.

Advertising and sales promotion spending for the fiscal year is anticipated to be about 10% of sales. This amount is a reflection of the company’s ongoing commitment to invest behind its brands.

Fiscal year selling and administrative expenses are expected to be approximately 15% of sales, about 1% of which is for the planned investments in digital capabilities and productivity enhancements.

The company’s effective tax rate is projected to be between 22% and 23%. The year-over-year increase primarily reflects lapping several one-time benefits in the prior fiscal year.

Net of these factors, Clorox anticipates fiscal year 2022 diluted EPS to be between $5.05 and $5.35, a decrease of between 9% and 4%, respectively. Adjusted EPS is projected to be between $5.40 and $5.70, a decrease of between 26% and 21%, respectively. Starting in the first quarter, adjusted EPS will exclude the long-term strategic investment in digital capabilities and productivity enhancements to provide greater visibility into the underlying operating performance of the overall business.

“I’m pleased that we delivered another strong sales year in a highly volatile environment,” said Chief Financial Officer Kevin Jacobsen. “We’re addressing near-term headwinds head on, prioritizing strong execution of the plans we have in place to rebuild our margins, including pricing in key areas of our portfolio as well as our hallmark cost savings program. At the same time, we’re supporting the long-term health of our business, with strong investments behind our brands and to further enhance our capabilities to deliver superior consumer value and sustainable growth.”

For More Detailed Financial Information

Visit the company’s Financial Information: Quarterly Results section of the company’s website at TheCloroxCompany.com for the following:

Supplemental unaudited volume and sales growth information
Supplemental unaudited gross margin driver information
Supplemental unaudited cash flow information and free cash flow reconciliation
Supplemental unaudited reconciliation of earnings before interest and taxes (EBIT) and adjusted EBIT

Note: Percentage and basis-point, or point, changes noted in this press release are calculated based on rounded numbers, except for per-share data and the effective tax rate. Supplemental materials are available in the Financial Information: Quarterly Results section of the company’s website at TheCloroxCompany.com.

The Clorox Company

The Clorox Company (NYSE: CLX) is a leading multinational manufacturer and marketer of consumer and professional products with about 9,000 employees worldwide and fiscal year 2021 sales of $7.3 billion. Clorox markets some of the most trusted and recognized consumer brand names, including its namesake bleach and cleaning products; Pine-Sol^® cleaners; Liquid-Plumr^® clog removers; Poett^® home care products; Fresh Step^® cat litter; Glad^® bags and wraps; Kingsford^® grilling products; Hidden Valley^® dressings and sauces; Brita^® water-filtration products; Burt’s Bees^® natural personal care products; and RenewLife^®, Rainbow Light^®, Natural Vitality CALM™, and NeoCell^® vitamins, minerals and supplements. The company also markets industry-leading products and technologies for professional customers, including those sold under the CloroxPro™ and Clorox Healthcare^® brand names. More than 80% of the company’s sales are generated from brands that hold the No. 1 or No. 2 market share positions in their categories.

Clorox is a signatory of the United Nations Global Compact and the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment. The company has been broadly recognized for its corporate responsibility efforts, included on the Barron’s 2020 100 Most Sustainable Companies list, 2021 Bloomberg Gender-Equality Index, the Human Rights Campaign’s 2021 Corporate Equality Index and the 2021 Parity.org Best Places for Women to Advance list, among others. In support of its communities, The Clorox Company and its foundations contributed about $20 million in combined cash grants, product donations and cause marketing in fiscal year 2021. For more information, visit TheCloroxCompany.com and follow the company on Twitter at @CloroxCo.

CLX-F

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, among others, statements related to the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of governments, consumers, customers, suppliers, employees and the company, on the company’s business, operations, employees, financial condition and results of operations, and any such forward-looking statements, whether concerning the COVID-19 pandemic or otherwise, involve risks, assumptions and uncertainties. Except for historical information, statements about future volumes, sales, organic sales growth, foreign currencies, costs, cost savings, margins, earnings, earnings attributable to the company, earnings per share, diluted earnings per share, foreign currency exchange rates, tax rates, cash flows, plans, objectives, expectations, growth or profitability are forward-looking statements based on management’s estimates, beliefs, assumptions and projections. Words such as “could,” “may,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “predicts,” and variations on such words, and similar expressions that reflect the company’s current views with respect to future events and operational, economic and financial performance are intended to identify such forward-looking statements. These forward-looking statements are only predictions, subject to risks and uncertainties, and actual results could differ materially from those discussed. Important factors that could affect performance and cause results to differ materially from management’s expectations, or could affect the company’s ability to achieve its strategic goals, are described in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as updated from time to time in the company’s Securities and Exchange Commission filings. These factors include, but are not limited to, the uncertainties relating to the continued impact of COVID-19 on the company’s business, operations, employees, financial condition and results of operations as well as: intense competition in the company’s markets; the impact of the changing retail environment, including the growth of alternative retail channels and business models, and changing consumer preferences; the impact of COVID-19 on the availability of, and efficiency of the supply, manufacturing and distribution systems for, the company’s products, including any significant disruption to such systems; volatility and increases in commodity costs such as resin, sodium hypochlorite and agricultural commodities, and increases in energy, transportation, labor or other costs; long-term changes in consumer preference or demand for the company’s products as a result of any shortages or lack of availability of any products in the near-term; risks related to supply chain issues and product shortages as a result of reliance on a limited base of suppliers and the significant increase in demand for disinfecting and other products due to the COVID-19 pandemic; dependence on key customers and risks related to customer consolidation and ordering patterns; risks related to the company’s use of and reliance on information technology systems, including potential security breaches, cyber-attacks, privacy breaches or data breaches that result in the unauthorized disclosure of consumer, customer, employee or company information, or service interruptions, especially at a time when a large number of the company’s employees are working remotely and accessing its technology infrastructure remotely; risks relating to acquisitions, including the recent acquisition of the majority interest in the company’s Saudi joint venture, new ventures and divestitures, and associated costs, including for asset impairment charges related to, among others, intangible assets, including trademarks, and goodwill, in particular the impairment charges relating to the carrying value of the company’s Vitamins, Minerals and Supplements business; unfavorable worldwide, regional and local economic and financial market conditions, including as a result of fear of exposure to or actual impacts of a widespread disease outbreak, such as COVID-19; effects of inflationary pressures; the company’s ability to maintain its business reputation and the reputation of its brands and products; lower revenue, increased costs or reputational harm resulting from government actions and regulations; the ability of the company to successfully manage global political, legal, tax and regulatory risks, including changes in regulatory or administrative activity; the ability of the company to drive sales growth, increase prices and market share, grow its product categories and manage favorable product and geographic mix; risks related to international operations and international trade, including foreign currency fluctuations, such as devaluations, and foreign currency exchange rate controls, including periodic changes in such controls; changes in U.S. immigration or trade policies, including the imposition of new or additional tariffs; labor claims and labor unrest; impact of the United Kingdom’s exit from the European Union; government-imposed price controls or other regulations; potential negative impact and liabilities from the use, storage and transportation of chlorine in certain international markets where chlorine is used in the production of bleach; widespread health emergencies, such as COVID-19; and the possibility of nationalization, expropriation of assets or other government action; the facilities of the company and its suppliers being subject to disruption by events beyond the company’s control, including work stoppages, cyber-attacks, natural disasters, disease outbreaks or pandemics, such as COVID-19, and terrorism; the ability of the company to innovate and to develop and introduce commercially successful products, or expand into adjacent categories and countries; the impact of product liability claims, labor claims and other legal, governmental or tax proceedings, including in foreign jurisdictions and in connection with any product recalls; the ability of the company to implement and generate cost savings and efficiencies; the success of the company’s business strategies; risks related to additional increases in the estimated fair value of The Procter & Gamble Company’s interest in the Glad business; the accuracy of the company’s estimates and assumptions on which its financial projections, including any sales or earnings guidance or outlook it may provide from time to time, are based; the company’s ability to attract and retain key personnel; environmental matters, including costs associated with the remediation and monitoring of past contamination, and possible increases in costs resulting from actions by relevant regulators, and the handling and/or transportation of hazardous substances; increased focus by governmental and non-governmental organizations, customers, consumers and investors on sustainability issues, including those related to climate change; the company’s ability to effectively utilize, assert and defend its intellectual property rights; any infringement or claimed infringement by the company of third-party intellectual property rights; the effect of the company’s indebtedness and credit rating on its business operations and financial results; the company’s ability to access capital markets and other funding sources, as well as continued or increased market volatility; the company’s ability to pay and declare dividends or repurchase its stock in the future; uncertainties relating to tax positions, tax disputes and any changes in tax rates and regulations on the company; the company’s ability to maintain an effective system of internal controls; the impacts of potential stockholder activism; and risks related to the company’s discontinuation of operations in Venezuela.

The company’s forward-looking statements in this press release are based on management’s current views, beliefs, assumptions and expectations regarding future events and speak only as of the date of this press release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws.

Non-GAAP Financial Information

This press release contains non-GAAP financial information related to organic sales growth/(decrease) and adjusted EPS for the fourth quarter of fiscal year 2021 and for the fiscal year 2021, organic sales growth/(decrease) and adjusted EPS outlook for fiscal year 2022, and Health and Wellness adjusted segment pretax earnings decrease for the fourth quarter of fiscal year 2021.
Clorox defines organic sales growth/(decrease) as GAAP net sales growth/(decrease) excluding the effect of foreign exchange rate changes and any acquisitions or divestitures.
Organic sales growth/(decrease) outlook for fiscal year 2022 excludes the impact of foreign currency exchange rate changes, which the company currently expects to have only a limited impact on GAAP net sales growth/(decrease).
Management believes that the presentation of organic sales growth/(decrease) is useful to investors because it excludes sales from any acquisitions and divestitures, which results in a comparison of sales only from the businesses that the company was operating and expects to continue to operate throughout the relevant periods, and the company’s estimate of the impact of foreign exchange rate changes, which are difficult to predict and out of the control of the company and management. However, organic sales growth/(decrease) may not be the same as similar measures provided by other companies due to potential differences in methods of calculation or differences in which items are incorporated into these adjustments.
Adjusted EPS is defined as diluted earnings per share that excludes or has otherwise been adjusted for significant items that are nonrecurring or unusual.
Adjusted EPS is supplemental information that management uses to help evaluate the company’s historical and prospective financial performance. Management believes that by adjusting for certain nonrecurring or unusual items, such as significant losses/(gains) related to acquisitions, impairment charges and other nonrecurring or unusual items, investors and management are able to gain additional insight into the company’s underlying operating performance on a consistent basis over time. However, adjusted EPS may not be the same as similar measures provided by other companies due to potential differences in methods of calculation or differences in which items are incorporated into these adjustments.
Adjusted segment pretax earnings decrease is defined as decrease in earnings (losses) before income taxes excluding the impact of certain nonrecurring or unusual items. Adjusted segment pretax earnings decrease of the Health and Wellness segment for the fourth quarter of fiscal year 2021 was 93%, which reflects a deduction of 11% related to a $28 noncash charge from the 104% GAAP pretax earnings decrease of the Health and Wellness segment for the fourth quarter of fiscal year 2021. The percentage changes are versus the year-ago period. Management believes that presentation of the adjusted segment pretax earnings decrease for the Health and Wellness segment is useful to investors to assess operating performance on a consistent basis by removing the impact of charges it believes do not directly reflect performance of the segment’s underlying operations.

The following tables provide reconciliations of organic sales growth/(decrease) (non-GAAP) to net sales growth/(decrease) (GAAP), the most comparable GAAP measure:

	Three Months Ended June 30, 2021
	Percentage change versus the year-ago period
	Health and Wellness	Household	Lifestyle	International	Total
Net sales growth / (decrease) (GAAP)	(17)%	(8)%	(3)%	5%	(9)%
Add: Foreign Exchange	—	—	—	1	—
Add/(Subtract): Divestitures/Acquisitions	—	—	—	(7)	(1)
Organic sales growth / (decrease) (non-GAAP)	(17)%	(8)%	(3%)	(1%)	(10)%

	Twelve Months Ended June 30, 2021
	Percentage change versus the year-ago period
	Health and Wellness	Household	Lifestyle	International	Total
Net sales growth / (decrease) (GAAP)	8%	10%	6%	14%	9%
Add: Foreign Exchange	—	—	—	3	1
Add/(Subtract): Divestitures/Acquisitions	—	—	—	(8)	(1)
Organic sales growth / (decrease) (non-GAAP)	8%	10%	6%	9%	9%

The following tables provide reconciliations of adjusted diluted earnings per share (non-GAAP) to diluted earnings per share, the most comparable GAAP measure:

Adjusted Earnings Per Share (EPS)
(Dollars in millions except per share data; shares in thousands)

	Diluted Earnings Per Share
	Three Months Ended June 30
	2021	2020	% Change

As reported (GAAP)	$ 0.78	$ 2.41	(68%)
Professional Products supplier charge ^(a)	0.17	$ –
As adjusted (Non-GAAP)	$ 0.95	$ 2.41	(61%)


	Diluted Earnings Per Share
	Twelve Months Ended June 30
	2021	2020	% Change

As reported (GAAP)	$ 5.58	$ 7.36	(24%)
Professional Products supplier charge^(a)	0.17	–
VMS impairment^(b)	2.10	–
Saudi JV acquisition gain^(c)	(0.60)	–
As adjusted (Non-GAAP)	$ 7.25	$ 7.36	(2%)


	Full Year 2022 Outlook (Estimated Range)
	Diluted Earnings Per Share
	Low	High

As estimated (GAAP)	$ 5.05	$ 5.35
Digital and other capabilities investments ^(d)	0.35	0.35
As adjusted (Non-GAAP)	$ 5.40	$ 5.70


^(a)During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded in connection with investments and related arrangements made with a Professional Products SBU supplier.
^(b)During the year ended June 30, 2021, noncash impairment charges of goodwill, trademarks and other assets were recorded of $329 ($267 after tax) related to the VMS SBU.
^(c)On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash non-recurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the quarter ended September 30, 2020, primarily due to the remeasurement of the carrying value of the company’s previously held equity investment to fair value.
^(d)In FY22, the company expects to incur approximately $55 ($42 after tax) of operating expenses related to its digital capabilities and productivity enhancements investment.

For recent presentations made by company management and other investor materials, visit Investor Events on the company’s website.

Condensed Consolidated Statements of Earnings (Unaudited)
Dollars in millions, except per share data



	Three Months Ended				Twelve Months Ended
	6/30/2021		6/30/2020		6/30/2021			6/30/2020
	(Unaudited)		(Unaudited)		(Unaudited)

Net sales	$	1,802	$	1,983	$	7,341	$		6,721
Cost of products sold		1,134		1,054		4,142			3,658
Gross profit		668		929		3,199			3,063

Selling and administrative expenses		260		279		1,004			969
Advertising costs		224		214		790			675
Research and development costs		45		42		149			145
Goodwill, trademark and other asset impairments		–		–		329			–
Interest expense		25		25		99			99
Other (income) expense, net		13		(26)		(72)			(10)
Earnings before income taxes		101		395		900			1,185
Income taxes		1		85		181			246
Net earnings		100		310		719			939
Less: Net earnings attributable to noncontrolling interests		3		–		9			–
Net earnings attributable to Clorox	$	97	$	310	$	710		$	939

Net earnings per share attributable to Clorox
Basic net earnings per share	$	0.79	$	2.45	$	5.66		$	7.46
Diluted net earnings per share	$	0.78	$	2.41	$	5.58		$	7.36

Weighted average shares outstanding (in thousands)
Basic		124,106		126,387		125,570			125,828
Diluted		125,385		128,494		127,299			127,671

Reportable Segment Information
(Unaudited)
Dollars in millions

	Net sales					Earnings (losses) before income taxes
	Three Months Ended					Three Months Ended
	6/30/2021		6/30/2020		% Change⁽¹⁾	6/30/2021		6/30/2020		% Change⁽¹⁾
Health and Wellness ⁽²⁾	$	670	$	805	-17%	$	(10)	$	252	-104%
Household		560		612	-8%		109		157	-31%
Lifestyle		290		298	-3%		61		78	-22%
International		282		268	5%		17		10	70%
Corporate		–		–	–		(76)		(102)	-25%
Total	$	1,802	$	1,983	-9%	$	101	$	395	-74%

	Net sales					Earnings (losses) before income taxes
	Twelve Months Ended					Twelve Months Ended
	6/30/2021		6/30/2020		% Change⁽¹⁾	6/30/2021		6/30/2020		% Change⁽¹⁾
Health and Wellness ^{(2) (3)}	$	2,980	$	2,749	8%	$	305	$	766	-60%
Household		1,981		1,795	10%		375		347	8%
Lifestyle		1,218		1,154	6%		320		320	0%
International⁽⁴⁾		1,162		1,023	14%		201		116	73%
Corporate		–		–	–		(301)		(364)	-17%
Total	$	7,341	$	6,721	9%	$	900	$	1,185	-24%

⁽¹⁾Percentages based on rounded numbers.
⁽²⁾During the quarter ended June 30, 2021, noncash charges of $28 ($21 after tax) were recorded in connection with investments and related arrangements made with a Professional Products SBU supplier.
⁽³⁾The earnings (losses) before income taxes for the Health and Wellness segment includes $329 noncash impairment charges for the Vitamins, Minerals and Supplements strategic business unit for the twelve months ended June 30, 2021.
⁽⁴⁾On July 9, 2020, the company increased its investment in each of the two entities comprising its joint venture in the Kingdom of Saudi Arabia (Saudi joint venture). As a result of this transaction, a noncash nonrecurring net gain was recognized of $82 ($76 after tax) in Other (income) expense, net in the quarter ended September 30, 2020, primarily due to the remeasurement of the carrying value of the company’s previously held equity investment to fair value.

Condensed Consolidated Balance Sheets
Dollars in millions


			6/30/2021		6/30/2020
			(Unaudited)

ASSETS
Current assets
	Cash and cash equivalents		$	319	$	871
	Receivables, net			604		648
	Inventories, net			752		454
	Prepaid expenses and other current assets			154		47
		Total current assets		1,829		2,020
Property, plant and equipment, net				1,302		1,103
Operating lease right-of-use assets				332		291
Goodwill				1,575		1,577
Trademarks, net				693		785
Other intangible assets, net				225		109
Other assets				378		328
Total assets			$	6,334	$	6,213

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Current maturities of long-term debt			$ 300		$ –
	Current operating lease liabilities			81		64
	Accounts payable and accrued liabilities			1,675		1,329
	Income taxes payable			–		25
		Total current liabilities		2,056		1,418
Long-term debt				2,484		2,780
Long-term operating lease liabilities				301		278
Other liabilities				834		767
Deferred income taxes				67		62
		Total liabilities		5,742		5,305

Stockholders’ equity
Preferred stock				–		–
Common stock				131		159
Additional paid-in capital				1,186		1,137
Retained earnings				1,036		3,567
Treasury stock				(1,396)		(3,315)
Accumulated other comprehensive net (loss) income				(546)		(640)
		Total Clorox stockholders’ equity		411		908
Noncontrolling interests				181		–
Total stockholders’ equity				592		908
Total liabilities and stockholders’ equity			$	6,334	$	6,213

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SOURCE The Clorox Company

August 3, 2021 6:34 am

PepsiCo Announces Portfolio Optimization Actions For Juice Businesses In North America and Europe

PR Newswire

PURCHASE, N.Y., Aug. 3, 2021 /PRNewswire/ — PepsiCo, Inc. (NASDAQ: PEP) today announced that it has entered into an agreement with PAI Partners (PAI) to sell Tropicana, Naked and other select juice brands across North America, and an irrevocable option to sell certain juice businesses in Europe, which will result in combined pre-tax cash proceeds of approximately $3.3 billion while retaining a 39% non-controlling interest in a newly formed joint venture. PAI, a leading private equity firm with strong experience in the food and beverage space, will be the majority shareholder of the transferred business, with PepsiCo retaining exclusive U.S. distribution rights to the portfolio of brands in its best-in-class, chilled Direct Store Delivery for small-format and foodservice channels.

“This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” said PepsiCo Chairman and CEO Ramon Laguarta. “In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet.”

“We are delighted to bring these storied beverage brands into the PAI portfolio through another partnership with a leading global food and beverage company. We believe there is great growth potential to be realized through investments in product innovation, expansion into adjacent categories, and enhanced scale in branded juice drinks and other chilled categories,” said Frédéric Stévenin, a Managing Partner at PAI. “We are also thrilled that PepsiCo will remain involved as our partner in the joint venture as we execute our plans to drive the future success of these brands.”

These juice businesses delivered approximately $3 billion in net revenue in 2020 with operating profit margins that were below PepsiCo’s overall operating margin in 2020. PepsiCo expects to use the proceeds from the sale of these assets primarily to strengthen its balance sheet and to make organic investments in the business. The transaction is expected to close in late 2021 or early 2022, subject to customary conditions, including works council consultations and regulatory approvals.

Centerview Partners LLC is acting as financial advisor to PepsiCo. Gibson, Dunn & Crutcher LLP is acting as lead counsel to PepsiCo, and Davis Polk & Wardwell LLP as U.S. tax and antitrust counsel. J.P. Morgan Securities LLC is acting as financial advisor to PAI. Willkie Farr & Gallagher LLP is serving as legal counsel to PAI, and Latham & Watkins LLP is acting as financing counsel.

About PAI Partners

PAI Partners is a pre-eminent private equity firm, investing in market-leading companies across the globe. It has significant experience in the food and beverage space and is currently invested in Froneri, the world’s #2 ice cream manufacturer, and Ecotone, a leader in healthy and sustainable food. It manages around €15 billion of dedicated buyout funds and, since 1994, has completed 84 investments in 11 countries, representing over €65 billion in transaction value. PAI has built an outstanding track record through partnering with ambitious management teams where its unique perspective, unrivalled sector experience and long-term vision enable companies to pursue their full potential – and push beyond. Learn more about the PAI story, the team and their approach at: www.paipartners.com.

About PepsiCo

PepsiCo products are enjoyed by consumers more than one billion times a day in more than 200 countries and territories around the world. PepsiCo generated more than $70 billion in net revenue in 2020, driven by a complementary food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker, Tropicana and SodaStream. PepsiCo’s product portfolio includes a wide range of enjoyable foods and beverages, including 23 brands that generate more than $1 billion each in estimated annual retail sales.

Guiding PepsiCo is our vision to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose. “Winning with Purpose” reflects our ambition to win sustainably in the marketplace and embed purpose into all aspects of our business strategy and brands. For more information, visit www.pepsico.com.

Cautionary Statement

This release contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “strategy,” “target” and “will” or similar statements or variations of such terms and other similar expressions. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such statements, including the impact of COVID-19; future demand for PepsiCo’s products; damage to PepsiCo’s reputation or brand image; issues or concerns with respect to product quality and safety; PepsiCo’s ability to compete effectively; PepsiCo’s ability to attract, develop and maintain a highly skilled and diverse workforce; water scarcity; changes in the retail landscape or in sales to any key customer; disruption of PepsiCo’s supply chain; political or social conditions in the markets where PepsiCo’s products are made, manufactured, distributed or sold; PepsiCo’s ability to grow its business in developing and emerging markets; changes in economic conditions in the countries in which PepsiCo operates; future cyber incidents and other disruptions; failure to successfully complete or manage strategic transactions; PepsiCo’s reliance on third-party service providers; climate change or measures to address climate change; strikes or work stoppages; failure to realize benefits from PepsiCo’s productivity initiatives; deterioration in estimates and underlying assumptions regarding future performance that can result in an impairment charge; fluctuations or other changes in exchange rates; any downgrade or potential downgrade of PepsiCo’s credit ratings; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of limitations on the marketing or sale of PepsiCo’s products; changes in laws and regulations related to the use or disposal of plastics or other packaging of PepsiCo’s products; failure to comply with personal data protection and privacy laws; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to adequately protect PepsiCo’s intellectual property rights or infringement on intellectual property rights of others; failure to comply with applicable laws and regulations; and potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations.

For additional information on these and other factors that could cause PepsiCo’s actual results to materially differ from those set forth herein, please see PepsiCo’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward looking statement, whether as a result of new information, future events or otherwise.

Contacts:

For PepsiCo:
Carrie Ratner
[email protected]

For PAI Partners:
Brian Ruby / Chris Gillick
ICR
[email protected]

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SOURCE PepsiCo, Inc.

August 3, 2021 6:34 am

Xenia Hotels & Resorts Reports Second Quarter 2021 Results

PR Newswire

ORLANDO, Fla., Aug. 3, 2021 /PRNewswire/ — Xenia Hotels & Resorts, Inc. (NYSE: XHR) (“Xenia” or the “Company”) today announced results for the quarter ended June 30, 2021.

Second Quarter 2021 Highlights

Net Loss: Net loss attributable to common stockholders was $(42.0) million, or $(0.36) per share.
Adjusted EBITDAre: Adjusted EBITDAre was $27.4 million.
Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.08.
Same-Property RevPAR: The Company had its entire Same-Property portfolio (34 properties) open and operating during the second quarter. These properties achieved RevPAR of $110.45, a decline of 38.7% versus the second quarter of 2019, as a result of occupancy of 51.4% and an ADR of $215.01.
Same-Property Hotel EBITDA: Same-Property Hotel EBITDA was $36.3 million.
Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 24.0%.

Year to Date 2021 Highlights

Net Loss: Net loss attributable to common stockholders was $(98.4) million, or $(0.86) per share.
Adjusted EBITDAre: Adjusted EBITDAre was $23.7 million.
Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $(0.10).
Same-Property RevPAR: The Company had its entire Same-Property portfolio (34 properties) open and operating during the first half of 2021. These properties achieved RevPAR of $88.20, a decline of 50.9% versus the six months ended June 30, 2019, as a result of occupancy of 43.1% and an ADR of $204.44.
Same-Property Hotel EBITDA: Same-Property Hotel EBITDA was $36.4 million.
Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 15.2%.

“We are pleased that continued improvement in lodging demand, the competitive positioning of our portfolio and excellent cost controls resulted in positive Adjusted EBITDAre and FFO for the second quarter,” commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. “After Adjusted FFO turned positive in March, we have seen this trend continue throughout the second quarter. While the recent resurgence of COVID-19 cases and the potential for the return of mandated or recommended social restrictions are a cause for concern, we believe that the proven desire for leisure and corporate travel as well as our diversified and well-located portfolio will allow us to continue to drive positive results in the months ahead. As a result of our portfolio’s performance and the balance sheet activities we have completed over the past 18 months, including our most recent notes offering, we believe we have created significant financial strength and flexibility which will allow us to be opportunistic and drive income growth in the years ahead. We will remain disciplined in our investment approach as we evaluate these opportunities while we continue to maximize our operating results.”

Operating Results The Company’s results include the following:

	Three Months Ended June 30,								Six Months Ended June 30, 2021
	2021			2020			Change		2021			2020			Change
	($ amounts in thousands, except hotel statistics and per share amounts)
Net loss attributable to common stockholders	$	(42,038)		$	(99,125)		57.6	%	$	(98,389)		$	(135,264)		27.3	%
Net loss per share available to common stockholders – basic and diluted	$	(0.36)		$	(0.88)		59.1	%	$	(0.86)		$	(1.20)		28.3	%

Same-Property Number of Hotels⁽¹⁾	34			34			—		34			34			—
Same-Property Number of Rooms⁽¹⁾	9,411			9,412			(1)		9,411			9,412			(1)
Same-Property Occupancy⁽¹⁾	51.4		%	3.9		%	4,750	bps	43.1		%	30.5		%	1,260	bps
Same-Property Average Daily Rate⁽¹⁾	$	215.01		$	184.17		16.7	%	$	204.44		$	224.85		(9.1)	%
Same-Property RevPAR⁽¹⁾	$	110.45		$	7.19		1,436.2	%	$	88.20		$	68.56		28.6	%
Same-Property Hotel EBITDA⁽¹⁾⁽²⁾	$	36,330		$	(35,529)		202.3	%	$	36,425		$	(4,294)		948.3	%
Same-Property Hotel EBITDA Margin⁽¹⁾⁽²⁾	24.0		%	(256.3)		%	28,037	bps	15.2		%	(2.1)		%	1,730	bps

Total Portfolio Number of Hotels⁽³⁾	35			39			(4)		35			39			(4)
Total Portfolio Number of Rooms⁽³⁾	10,011			11,245			(1,234)		10,011			11,245			(1,234)
Total Portfolio RevPAR⁽⁴⁾	$	104.50		$	6.80		1,436.8	%	$	83.25		$	64.24		29.6	%

Adjusted EBITDAre⁽²⁾	$	27,388		$	(45,018)		160.8	%	$	23,738		$	(20,517)		215.7	%
Adjusted FFO⁽²⁾	$	9,086		$	(55,039)		116.5	%	$	(11,713)		$	(35,627)		67.1	%
Adjusted FFO per diluted share⁽²⁾	$	0.08		$	(0.48)		116.7	%	$	(0.10)		$	(0.31)		67.7	%


1.	“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center. Includes hotels that had temporarily suspended operations for a portion of the three and six months ended June 30, 2020, as if all hotel rooms were available for sale. “Same-Property” also includes disruption from the COVID-19 pandemic in 2021 and 2020, and renovation disruption for multiple capital projects during the periods presented.

2.	See tables later in this press release for reconciliations from net loss to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”), Adjusted EBITDAre, Funds From Operations (“FFO”), Adjusted FFO, Same-Property Hotel EBITDA and Hotel EBITDA Margin. EBITDA, EBITDAre, Adjusted EBITDAre, FFO, Adjusted FFO, and Same-Property Hotel EBITDA and Hotel EBITDA Margin are non-GAAP financial measures.

3.	As of end of periods presented.

4.	Results of all hotels as owned during the periods presented, including the results of hotels sold or acquired for the actual period of ownership by the Company. Includes hotels that had temporarily suspended operations for a portion of or all of the three and six months ended June 30, 2021 and 2020, as if all hotel rooms were available for sale.

Operations Update

As of June 30, 2021, all 35 of the Company’s hotels and resorts were open and operating. The Company recommenced operations at Hyatt Regency Portland at the Oregon Convention Center on May 24, 2021.

The following table provides operating information for the six months ended June 30, 2021 and preliminary operating information for July 2021:

																			PRELIMINARY
	January 2021			February 2021			March 2021			April 2021			May 2021			June 2021			July 2021
Same-Property Portfolio
Number of Hotels	34			34			34			34			34			34			34
Number of Rooms	9,411			9,411			9,411			9,411			9,411			9,411			9,411
Occupancy	24.5		%	34.5		%	45.4		%	48.9		%	49.7		%	55.5		%	59.2		%
Average Daily Rate	$	170.41		$	183.58		$	202.07		$	216.03		$	216.18		$	213.03		$	223.53
RevPAR	$	41.83		$	63.35		$	91.69		$	105.67		$	107.46		$	118.32		$	132.38

2021 vs 2019
Occupancy change in bps	(4,505)		bps	(4,384)		bps	(3,564)		bps	(3,238)		bps	(2,856)		bps	(2,427)		bps	(1,926)		bps
Average Daily Rate % change	(24.4)		%	(23.1)		%	(16.0)		%	(7.0)		%	(6.4)		%	(0.3)		%	9.0		%
RevPAR % change	(73.3)		%	(66.1)		%	(52.9)		%	(44.0)		%	(40.5)		%	(30.6)		%	(17.7)		%

“Our operating results have steadily improved since the beginning of the year, culminating in our Same-Property Portfolio achieving occupancy of 55.5% and RevPAR of $118.32 in June,” said Mr. Verbaas. “With all of our hotels and resorts now open for business, 32 of our properties generated positive Hotel EBITDA during the second quarter. Encouragingly, our Same-Property ADR during the month of June was essentially flat when compared to June of 2019. The substantial sequential improvement in monthly occupancy when compared to 2019 gives us cause for optimism as the summer progresses and we look ahead to the second half of the year.”

“Strong leisure transient demand continues to drive this early phase of the recovery, with group and business transient demand slowly returning,” continued Mr. Verbaas. “Our drive-to leisure-focused hotels continue to be bright spots in the portfolio, with 9 of these hotels and resorts generating higher Hotel EBITDA in June than during the same period in 2019 and 7 of these properties doing so for the entire second quarter. The improvement in hotel performance has continued into the early part of the third quarter, with estimated RevPAR in July only approximately 18% below July 2019, as ADR substantially exceeded its 2019 level and occupancy approached 60%.”

Capital Markets

In May, the Company issued $500 million of 4.875% senior secured notes maturing in June 2029, enabling it to address all of its near-term debt maturities. Proceeds were used to repay the $163.1 million balance on the revolving credit facility, $150 million term loan, and for general corporate purposes. The Company also repaid the $56.8 million mortgage loan collateralized by Kimpton Hotel Palomar Philadelphia.

Also in May, the Company’s Board of Directors approved increasing the availability under the “At-the-Market” (“ATM”) Program to $200 million to allow for additional capital raise flexibility. As of June 30, 2021, the Company had $200 million remaining available for sale under the ATM Program.

Corporate Credit Facility Amendments

In May, the Company entered into further amendments to its revolving credit facility and its only remaining corporate credit facility term loan, which expanded the Company’s transactional and operational flexibility and extended the covenant waiver period by one quarter (through the first quarter of 2022).

Liquidity and Balance Sheet

As of June 30, 2021, the Company had total outstanding debt of $1.5 billion with a weighted-average interest rate of 5.12%. The Company had approximately $500 million of cash and cash equivalents, and full availability on its $523 million revolving credit facility, resulting in total liquidity of approximately $1.0 billion as of June 30, 2021. In addition, the Company held approximately $35 million of restricted cash and escrows at the end of the second quarter.

Capital Expenditures

During the three and six months ended June 30, 2021, the Company invested $4.6 million and $11.9 million in portfolio improvements, respectively.

Significant projects currently in process include:

The development of the Regency Court, a new outdoor social venue, at Hyatt Regency Scottsdale Resort & Spa with a targeted completion date early in the fourth quarter of 2021
A restaurant and lobby renovation at The Ritz-Carlton, Pentagon City with a targeted completion date early in the fourth quarter of 2021
A restaurant and lobby renovation at Waldorf Astoria Atlanta Buckhead with a targeted completion date early in the first quarter of 2022

Additionally, the Company has accelerated several projects to take advantage of current business conditions. These include:

A guest room renovation at Waldorf Astoria Atlanta Buckhead with a targeted completion date in the first quarter of 2022
A comprehensive renovation of Grand Bohemian Hotel Orlando, including guest rooms with substantial tub-to-shower conversions, restaurant and bar, lobby, rooftop pool area, and meeting space. This project will take place in phases beginning in the first quarter of 2022 with an estimated completion date in the first quarter of 2023 in order to minimize disruption
A comprehensive renovation of Kimpton Canary Hotel Santa Barbara, including guest rooms, restaurant and bar, rooftop, lobby, and meeting space with a targeted completion date in the second quarter of 2022

Impairment Loss

During the second quarter, the Company began marketing Marriott Charleston Town Center for sale. As a result, the Company recorded a non-cash impairment charge of $12.3 million to reflect the estimated current market value.

2021 Outlook and Guidance

The Company does not expect to issue full year earnings guidance until it has more certainty on trends within the industry. The Company is providing the following guidance for full year 2021 on certain corporate expenses and metrics:

General and administrative expenses are projected to be approximately $19 million, excluding non-cash share-based compensation.
Interest expense is projected to be approximately $75 million, which reflects the capital markets transactions that occurred in May and excludes non-cash loan related costs.
Capital expenditures are projected to be approximately $40 million.
114.5 million weighted average diluted shares/units

Second Quarter 2021 Earnings Call

The Company will conduct its quarterly conference call on Tuesday, August 3, 2021 at 1:00 PM Eastern Time. To participate in the conference call, please dial (855) 656-0921. Additionally, a live webcast of the conference call will be available through the Company’s website, www.xeniareit.com. A replay of the conference call will be archived and available online through the Investor Relations section of the Company’s website for 90 days.

About Xenia Hotels & Resorts, Inc.

Xenia Hotels & Resorts, Inc. is a self-advised and self-administered REIT that invests in uniquely positioned luxury and upper upscale hotels and resorts with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 35 hotels and resorts comprising 10,011 rooms across 15 states. Xenia’s hotels are in the luxury and upper upscale segments, and are operated and/or licensed by industry leaders such as Marriott, Hyatt, Kimpton, Fairmont, Loews, Hilton, and The Kessler Collection. For more information on Xenia’s business, refer to the Company website at www.xeniareit.com.

This press release, together with other statements and information publicly disseminated by the Company, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements are not historical facts but are based on certain assumptions of management and describe the Company’s future plans, strategies and expectations. Forward-looking statements are generally identifiable by use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “guidance,” “predict,” “potential,” “continue,” “likely,” “will,” “would,” “illustrative,” references to “outlook” and “guidance,” and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Forward-looking statements in this press release include, among others, statements about our plans, strategies, the outlook related to the effects of the COVID-19 pandemic, including on the demand for travel, transient and group business, capital expenditures, timing of renovations, financial performance, prospects or future events. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. As a result, our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements, which are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, (i) the impact of the COVID-19 pandemic, including on the demand for travel, transient and group business, and levels of consumer confidence; (ii) actions that governments, businesses, and individuals take in response to the COVID-19 pandemic or any resurgence of COVID-19 including variants of the virus, including limiting or banning travel; (iii) the impact of the COVID-19 pandemic and actions taken in response to the pandemic or any resurgence on global, national, or regional economies, travel and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; (iv) the ability of hotel managers to successfully navigate the impacts of the COVID-19 pandemic; (v) the pace of recovery following the COVID-19 pandemic or any resurgence; (vi) factors such as public health (including a significant increase in new and variant strains of COVID-19 cases), availability and effectiveness of COVID-19 vaccines and therapeutics, the level of acceptance of the vaccine by the general population and the economic and geopolitical environments may impact the timing, extent and pace of such recovery; (vii) the Company’s dependence on third-party managers of its hotels, including its inability to implement strategic business decisions directly; (viii) risks associated with the hotel industry, including competition, increases in wages and benefits, energy costs and other operating costs, actual or threatened terrorist attacks, information technology failures, downturns in general and local economic conditions, prolonged periods of civil unrest in our markets, and cancellation of or delays in the completion of anticipated demand generators; (ix) the availability and terms of financing and capital and the general volatility of securities markets; (x) risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act and similar laws; (xi) interest rate increases; (xii) ability to successfully negotiate amendments and covenant waivers with its unsecured and secured indebtedness; (xiii) ability to comply with covenants, restrictions, and limitations in any existing or revised loan agreements with our unsecured and secured lenders; (xiv) the possible failure of the Company to qualify as a REIT and the risk of changes in laws affecting REITs; (xv) the possibility of uninsured or underinsured losses, including those relating to natural disasters, terrorism, government shutdowns and closures, civil unrest, or cyber incidents; (xvi) risks associated with redevelopment and repositioning projects, including delays and cost overruns; (xvii) levels of spending in business and leisure segments as well as consumer confidence; (xviii) declines in occupancy and average daily rate, (xix) the seasonal and cyclical nature of the real estate and hospitality businesses, (xx) changes in distribution arrangements, such as through Internet travel intermediaries; (xxi) relationships with labor unions and changes in labor laws, including increases to minimum wages; (xxii) the impact of changes in the tax code and uncertainty as to how some of those changes may be applied; (xxiii) monthly cash expenditures and the uncertainty around predictions; (xxiv) vaccination hesitancy and/or effectiveness; (xxv) inflationary caution; (xxvi) labor shortages; and (xxvii) the risk factors discussed in the Company’s Annual Report on Form 10-K, as updated in its Quarterly Reports. Accordingly, there is no assurance that the Company’s expectations will be realized. We caution you not to place undue reliance on any forward-looking statements, which are made only as of the date of this press release. We do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

For further information about the Company’s business and financial results, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the Company’s SEC filings, including, but not limited to, its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which may be obtained at the Investor Relations section of the Company’s website at www.xeniareit.com.

All information in this press release is as of the date of its release. The Company undertakes no duty to update the statements in this press release to conform the statements to actual results or changes in the Company’s expectations.

Availability of Information on Xenia’s Website

Investors and others should note that Xenia routinely announces material information to investors and the marketplace using U.S. Securities and Exchange Commission (SEC) filings, press releases, public conference calls, webcasts, and the Investor Relations section of Xenia’s website. While not all the information that the Company posts to the Xenia website is of a material nature, some information could be deemed to be material. Accordingly, the Company encourages investors, the media, and others interested in Xenia to review the information that it shares at the Investor Relations link located on www.xeniareit.com. Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting “Email Alerts / Investor Information” in the “Corporate Overview” section of Xenia’s Investor Relations website at www.xeniareit.com.

For additional information or to receive press releases via email, please visit our website at www.xeniareit.com.

Xenia Hotels & Resorts, Inc. Condensed Consolidated Balance Sheets As of June 30, 2021 and December 31, 2020 ($ amounts in thousands)
	June 30, 2021		December 31, 2020
Assets	(Unaudited)		(Audited)
Investment properties:
Land	$	446,649	$	446,855
Buildings and other improvements	2,944,101		2,949,114
Total	$	3,390,750	$	3,395,969
Less: accumulated depreciation	(892,972)		(827,501)
Net investment properties	$	2,497,778	$	2,568,468
Cash and cash equivalents	500,337		389,823
Restricted cash and escrows	34,572		38,963
Accounts and rents receivable, net of allowance for doubtful accounts	19,869		8,966
Intangible assets, net of accumulated amortization	5,951		6,456
Other assets	67,700		66,927
Total assets	$	3,126,207	$	3,079,603
Liabilities
Debt, net of loan premiums, discounts and unamortized deferred financing costs	$	1,494,105	$	1,374,480
Accounts payable and accrued expenses	83,439		62,676
Other liabilities	73,569		75,584
Total liabilities	$	1,651,113	$	1,512,740
Commitments and Contingencies
Stockholders’ equity
Common stock, $0.01 par value, 500,000,000 shares authorized, 114,209,134 and 113,755,513 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	$	1,142	$	1,138
Additional paid in capital	2,089,550		2,080,364
Accumulated other comprehensive loss	(7,644)		(14,425)
Accumulated distributions in excess of net earnings	(611,391)		(513,002)
Total Company stockholders’ equity	$	1,471,657	$	1,554,075
Non-controlling interests	3,437		12,788
Total equity	$	1,475,094	$	1,566,863
Total liabilities and equity	$	3,126,207	$	3,079,603

Xenia Hotels & Resorts, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited) ($ amounts in thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Rooms revenues	$	95,195	$	6,956	$	150,841	$	131,470
Food and beverage revenues	40,143		2,097		61,735		75,825
Other revenues	16,636		5,772		27,250		22,881
Total revenues	$	151,974	$	14,825	$	239,826	$	230,176
Expenses:
Rooms expenses	$	22,388	$	7,116	$	37,925	$	42,191
Food and beverage expenses	28,592		7,749		46,770		60,722
Other direct expenses	4,736		1,507		7,934		6,900
Other indirect expenses	44,047		26,718		81,374		96,807
Management and franchise fees	6,140		(161)		8,984		7,169
Total hotel operating expenses	$	105,903	$	42,929	$	182,987	$	213,789
Depreciation and amortization	33,008		37,263		66,205		74,353
Real estate taxes, personal property taxes and insurance	10,997		13,097		21,537		26,772
Ground lease expense	379		372		782		1,126
General and administrative expenses	8,096		9,829		15,018		17,980
Gain on business interruption insurance	—		—		(1,116)		—
Acquisition, terminated transaction and pre-opening expenses	—		848		—		848
Impairment and other losses	12,313		3,735		12,313		20,102
Total expenses	$	170,696	$	108,073	$	297,726	$	354,970
Operating loss	$	(18,722)	$	(93,248)	$	(57,900)	$	(124,794)
Other (expense) income	(2,805)		2,242		(2,689)		2,369
Interest expense	(19,691)		(13,571)		(38,441)		(26,595)
Loss on extinguishment of debt	(1,356)		—		(1,356)		—
Net loss before income taxes	$	(42,574)	$	(104,577)	$	(100,386)	$	(149,020)
Income tax (expense) benefit	(169)		3,090		(334)		10,402
Net loss	$	(42,743)	$	(101,487)	$	(100,720)	$	(138,618)
Net loss attributable to non-controlling interests	705		2,362		2,331		3,354
Net loss attributable to common stockholders	$	(42,038)	$	(99,125)	$	(98,389)	$	(135,264)

Xenia Hotels & Resorts, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss – Continued For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited) ($ amounts in thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic and diluted loss per share:
Net loss per share available to common stockholders – basic and diluted	$	(0.36)	$	(0.88)	$	(0.86)	$	(1.20)
Weighted-average number of common shares (basic and diluted)	113,806,186		113,498,689		113,793,419		113,242,786

Comprehensive Loss:
Net loss	$	(42,743)	$	(101,487)	$	(100,720)	$	(138,618)
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate derivative instruments	2,449		(1,679)		2,553		(18,800)
Reclassification adjustment for amounts recognized in net loss (interest expense)	2,070		2,261		4,400		2,671
	$	(38,224)	$	(100,905)	$	(93,767)	$	(154,747)
Comprehensive loss attributable to non-controlling interests	601		2,348		2,159		3,825
Comprehensive loss attributable to the Company	$	(37,623)	$	(98,557)	$	(91,608)	$	(150,922)

Non-GAAP Financial Measures

The Company considers the following non-GAAP financial measures to be useful to investors as key supplemental measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDAre, Same-Property Hotel EBITDA, Same-Property Hotel EBITDA Margin, FFO, Adjusted FFO, and Adjusted FFO per diluted share. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss, operating profit, cash from operations, or any other operating performance measure as prescribed per GAAP.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA is a commonly used measure of performance in many industries and is defined as net income or loss (calculated in accordance with GAAP) excluding interest expense, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. The Company considers EBITDA useful to investors, in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results, even though EBITDA does not represent an amount that accrues directly to common stockholders. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions and, along with FFO and Adjusted FFO, is used by management in the annual budget process for compensation programs.

We calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines EBITDAre as EBITDA plus or minus losses and gains on the disposition of depreciated property, including gains or losses on change of control, plus impairments of depreciated property and of investments in unconsolidated affiliates caused by a decrease in the value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates.

We further adjust EBITDAre to exclude the impact of non-controlling interests in consolidated entities other than our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We also adjust EBITDAre for certain additional items such as depreciation and amortization related to corporate assets, hotel property acquisition, terminated transaction and pre-opening expenses, amortization of share-based compensation, non-cash ground rent and straight-line rent expense, the cumulative effect of changes in accounting principles, and other costs we believe do not represent recurring operations and are not indicative of the performance of our underlying hotel property entities. We believe it is meaningful for investors to understand Adjusted EBITDAre attributable to all common stock and unit holders. We believe Adjusted EBITDAre attributable to common stock and unit holders provides investors with another useful financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.

Same-Property Hotel EBITDA and Same-Property Hotel EBITDA Margin

Same-Property hotel data includes the actual operating results for all hotels owned as of the end of the reporting period. We then adjust the Same-Property hotel data for comparability purposes by including pre-acquisition operating results of asset(s) acquired during the period, which provides investors a basis for understanding the acquisition(s) historical operating trends and seasonality. The pre-acquisition operating results for the comparable period are obtained from the seller and/or manager of the hotels during the acquisition due diligence process and have not been audited or reviewed by our independent auditors. We further adjust the Same-Property hotel data to remove dispositions during the respective reporting periods, and, in certain cases, hotels that are not fully open due to significant renovation, re-positioning, or disruption or whose room counts have materially changed during either the current or prior year as these historical operating results are not indicative of or expected to be comparable to the operating performance of our hotel portfolio on a prospective basis.

Same-Property Hotel EBITDA represents net income or loss excluding: (1) interest expense, (2) income taxes, (3) depreciation and amortization, (4) corporate-level costs and expenses, (5) hotel acquisition and terminated transaction costs, and (6) certain state and local excise taxes resulting from our ownership structure. We believe that Same-Property Hotel EBITDA provides our investors a useful financial measure to evaluate our hotel operating performance excluding the impact of our capital structure (primarily interest expense), our asset base (primarily depreciation and amortization), income taxes, and our corporate-level expenses (corporate expenses and hotel acquisition and terminated transaction costs). We believe property-level results provide investors with supplemental information on the ongoing operational performance of our hotels and the effectiveness of our third-party management companies that operate our business on a property-level basis. Same-Property Hotel EBITDA Margin is calculated by dividing Same-Property Hotel EBITDA by Same-Property Total Revenues.

As a result of these adjustments the Same-Property hotel data we present does not represent our total revenues, expenses, operating profit or net income and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our condensed consolidated statements of operations and comprehensive loss include such amounts, all of which should be considered by investors when evaluating our performance.

We include Same-Property hotel data as supplemental information for investors. Management believes that providing Same-Property hotel data is useful to investors because it represents comparable operations for our portfolio as it exists at the end of the respective reporting periods presented, which allows investors and management to evaluate the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at Same-Property hotels or from other factors, such as the effect of acquisitions or dispositions.

FFO and Adjusted FFO

The Company calculates FFO in accordance with standards established by Nareit, as amended in the December 2018 restatement white paper, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains or losses from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and consolidated variable interest entities, and items classified by GAAP as extraordinary. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. The Company believes that the presentation of FFO provides useful supplemental information to investors regarding operating performance by excluding the effect of real estate depreciation and amortization, gains or losses from sales for real estate, impairments of real estate assets, extraordinary items and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance. The Company believes that the presentation of FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders. The calculation of FFO may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. Additionally, FFO may not be helpful when comparing Xenia to non-REITs. The Company presents FFO attributable to common stock and unit holders, which includes its Operating Partnership Units because its Operating Partnership Units may be redeemed for common stock. The Company believes it is meaningful for the investor to understand FFO attributable to common stock and unit holders.

We further adjust FFO for certain additional items that are not in Nareit’s definition of FFO such as hotel property acquisition, terminated transaction and pre-opening expenses, amortization of debt origination costs and share-based compensation, non-cash ground rent and straight-line rent expense, and other items we believe do not represent recurring operations. We believe that Adjusted FFO provides investors with useful supplemental information that may facilitate comparisons of ongoing operating performance between periods and between REITs that make similar adjustments to FFO and is beneficial to investors’ complete understanding of our operating performance.

Adjusted FFO per diluted share

The diluted weighted-average common share count used for the calculation of Adjusted FFO per diluted share differs from diluted weighted-average common share count used to derive net income or loss per share available to common stockholders. The Company calculates Adjusted FFO per diluted share by dividing the Adjusted FFO by the diluted weighted-average number of shares of common stock outstanding plus the weighted-average vested Operating Partnership units. Any anti-dilutive securities are excluded from the diluted earnings per-share calculation.

Xenia Hotels & Resorts, Inc. Reconciliation of Net (Loss) Income to EBITDA, EBITDAre, Adjusted EBITDAre and Same-Property Hotel EBITDA For the Three Months Ended June 30, 2021, 2020 and 2019 (Unaudited) ($ amounts in thousands)

	Three Months Ended June 30,
	2021		2020		2019
Net (loss) income	$	(42,743)	$	(101,487)	$	13,214
Adjustments:
Interest expense	19,691		13,571		12,380
Income tax expense (benefit)	169		(3,090)		6,193
Depreciation and amortization	33,008		37,263		39,689
EBITDA	$	10,125	$	(53,743)	$	71,476
Impairment and other losses⁽¹⁾	12,313		3,735		14,771
EBITDAre	$	22,438	$	(50,008)	$	86,247

Reconciliation to Adjusted EBITDAre
Depreciation and amortization related to corporate assets	$	(102)	$	(97)	$	(102)
Loss on extinguishment of debt	1,356		—		—
Acquisition, terminated transaction and pre-opening expenses	—		848		284
Amortization of share-based compensation expense	3,643		4,268		2,902
Non-cash ground rent and straight-line rent expense	33		80		128
Other income attributed to forfeited deposits recognized from terminated transactions⁽²⁾	—		(2,000)		—
Other non-recurring expenses	20		1,891		—
Adjusted EBITDAre attributable to common stock and unit holders	$	27,388	$	(45,018)	$	89,459
Corporate-level costs and expenses	7,416		3,891		5,258
Pro forma hotel level adjustments, net	1,526		5,598		(16,359)
Other	—		—		(822)
Same-Property Hotel EBITDA attributable to common stock and unit holders⁽³⁾	$	36,330	$	(35,529)	$	77,536


1.	During the three months ended June 30, 2021, the Company recorded a $12.3 million impairment loss related to Marriott Charleston Town Center, which was attributed to its net book value exceeding the undiscounted cash flows over a shortened expected hold period.

2.	During the third quarter of 2020 the Company changed the year-to-date presentation of Adjusted EBITDAre to exclude the income from terminated transactions as it was considered non-recurring investment activities, which included $2.0 million of other income that was recognized in the second quarter of 2020.

3.	See the reconciliation of Total Revenues and Hotel Operating Expenses on a consolidated GAAP basis to Total Same-Property Revenues and Total Same-Property Hotel Operating Expenses and the calculation of Same-Property Hotel EBITDA and Hotel EBITDA Margin for the three months ended June 30, 2021 and 2020 on page 17 and for the three months ended June 30, 2021 and 2019 on page 18.

Xenia Hotels & Resorts, Inc. Reconciliation of Net (Loss) Income to EBITDA, EBITDAre, Adjusted EBITDAre and Same-Property Hotel EBITDA For the Six Months Ended June 30, 2021, 2020 and 2019 (Unaudited) ($ amounts in thousands)

	Six Months Ended June 30,
	2021		2020		2019
Net (loss) income	$	(100,720)	$	(138,618)	$	30,490
Adjustments:
Interest expense	38,441		26,595		24,967
Income tax expense (benefit)	334		(10,402)		12,286
Depreciation and amortization	66,205		74,353		79,689
EBITDA	$	4,260	$	(48,072)	$	147,432
Impairment and other losses⁽¹⁾	12,313		20,102		14,771
EBITDAre	$	16,573	$	(27,970)	$	162,203

Reconciliation to Adjusted EBITDAre
Depreciation and amortization related to corporate assets	$	(203)	$	(194)	$	(205)
Loss on extinguishment of debt	1,356		—		214
Acquisition, terminated transaction and pre-opening expenses	—		848		284
Amortization of share-based compensation expense	5,938		6,308		4,796
Non-cash ground rent and straight-line rent expense	51		158		254
Other income attributed to forfeited deposits recognized from terminated transactions⁽²⁾	—		(2,000)		—
Other non-recurring expenses	23		2,333		—
Adjusted EBITDAre attributable to common stock and unit holders	$	23,738	$	(20,517)	$	167,546
Corporate-level costs and expenses	12,105		10,030		11,874
Pro forma hotel level adjustments, net	1,698		6,473		(22,228)
Other	(1,116)		(280)		(822)
Same-Property Hotel EBITDA attributable to common stock and unit holders⁽³⁾	$	36,425	$	(4,294)	$	156,370


1.	During the six months ended June 30, 2020, the Company recorded a $12.3 million impairment loss related to Marriott Charleston Town Center, which was attributed to its net book value exceeding the undiscounted cash flows over a shortened expected hold period.

2.	During the third quarter of 2020 the Company changed the year-to-date presentation of Adjusted EBITDAre to exclude the income from terminated transactions as it was considered non-recurring investment activities, which included $2.0 million of other income that was recognized in the second quarter of 2020.

3.	See the reconciliation of Total Revenues and Total Hotel Operating Expenses on a consolidated GAAP basis to Total Same-Property Revenues and Total Same-Property Hotel Operating Expenses and the calculation of Same-Property Hotel EBITDA and Hotel EBITDA Margin for the six months ended June 30, 2021 and 2020 on page 17 and for the six months ended June 30, 2021 and 2019 on page 18.

Xenia Hotels & Resorts, Inc. Reconciliation of Net (Loss) Income to FFO and Adjusted FFO For the Three Months Ended June 30, 2021, 2020 and 2019 (Unaudited) ($ amounts in thousands)

	Three Months Ended June 30,
	2021		2020		2019
Net (loss) income	$	(42,743)	$	(101,487)	$	13,214
Adjustments:
Depreciation and amortization related to investment properties	32,906		37,166		39,587
Impairment of investment properties⁽¹⁾	12,313		3,735		14,771
FFO attributable to common stock and unit holders	$	2,476	$	(60,586)	$	67,572
Reconciliation to Adjusted FFO
Loss on extinguishment of debt	1,356		—		—
Acquisition, terminated transaction and pre-opening expenses	—		848		284
Loan related costs, net of adjustment related to non-controlling interests⁽²⁾	1,558		460		602
Amortization of share-based compensation expense	3,643		4,268		2,902
Non-cash ground rent and straight-line rent expense	33		80		128
Other income attributed to forfeited deposits recognized from terminated transactions⁽³⁾	—		(2,000)		—
Other non-recurring expenses	20		1,891		—
Adjusted FFO attributable to common stock and unit holders	$	9,086	$	(55,039)	$	71,488
Weighted-average shares outstanding – Diluted⁽⁴⁾	113,806		114,333		114,321
Adjusted FFO per diluted share	$	0.08	$	(0.48)	$	0.63


1.	During the three months ended June 30, 2021, the Company recorded a $12.3 million impairment loss related to Marriott Charleston Town Center, which was attributed to its net book value exceeding the undiscounted cash flows over a shortened expected hold period.

2.	Loan related costs includes amortization of debt premiums, discounts and deferred loan origination costs.

3.	During the third quarter of 2020 the Company changed the year-to-date presentation of Adjusted FFO to exclude the income from terminated transactions as it was considered non-recurring investment activities, which included $2.0 million of other income that was recognized in the second quarter of 2020.

4.	Diluted weighted-average number of shares of common stock outstanding plus the weighted-average vested Operating Partnership units for the respective periods presented in thousands.

Xenia Hotels & Resorts, Inc. Reconciliation of Net (Loss) Income to FFO and Adjusted FFO For the Six Months Ended June 30, 2021, 2020 and 2019 (Unaudited) ($ amounts in thousands)

	Six Months Ended June 30,
	2021		2020		2019
Net (loss) income	$	(100,720)	$	(138,618)	$	30,490
Adjustments:
Depreciation and amortization related to investment properties	66,002		74,159		79,484
Impairment of investment properties⁽¹⁾	12,313		20,102		14,771
FFO attributable to common stock and unit holders	$	(22,405)	$	(44,357)	$	124,745
Reconciliation to Adjusted FFO
Loss on extinguishment of debt	1,356		—		214
Acquisition, terminated transaction and pre-opening expenses	—		848		284
Loan related costs, net of adjustment related to non-controlling interests⁽²⁾	3,324		1,083		1,227
Amortization of share-based compensation expense	5,938		6,308		4,796
Non-cash ground rent and straight-line rent expense	51		158		254
Other income attributed to forfeited deposits recognized from terminated transactions⁽³⁾	—		(2,000)		—
Other non-recurring expenses	23		2,333		—
Adjusted FFO attributable to common stock and unit holders	$	(11,713)	$	(35,627)	$	131,520
Weighted-average shares outstanding – Diluted⁽⁴⁾	114,826		114,405		114,245
Adjusted FFO per diluted share	$	(0.10)	$	(0.31)	$	1.15


1.	During the six months ended June 30, 2021, the Company recorded a $12.3 million impairment loss related to Marriott Charleston Town Center, which was attributed to its net book value exceeding the undiscounted cash flows over a shortened expected hold period.

2.	Loan related costs includes amortization of debt premiums, discounts and deferred loan origination costs.

3.	During the third quarter of 2020 the Company changed the year-to-date presentation of Adjusted FFO to exclude the income from terminated transactions as it was considered non-recurring investment activities, which included $2.0 million of other income that was recognized in the second quarter of 2020.
4.	Diluted weighted-average number of shares of common stock outstanding plus the weighted-average vested Operating Partnership units for the respective periods presented in thousands.

Xenia Hotels & Resorts, Inc. Debt Summary as of June 30, 2021 (Unaudited) ($ amounts in thousands)

	Rate Type	Rate⁽¹⁾			Maturity Date	Outstanding as of June 30, 2021

Mortgage Loans
Renaissance Atlanta Waverly Hotel & Convention Center	Fixed⁽²⁾	3.93	%		August 2024	$	100,000
Andaz Napa	Partially Fixed ⁽³⁾	2.79	%		September 2024	56,000
The Ritz-Carlton, Pentagon City	Fixed⁽⁴⁾	4.95	%		January 2025	65,000
Grand Bohemian Hotel Orlando, Autograph Collection	Fixed	4.53	%		March 2026	57,333
Marriott San Francisco Airport Waterfront	Fixed	4.63	%		May 2027	113,042
Total Mortgage Loans		4.23	%	⁽⁵⁾		$	391,375
Corporate Credit Facilities
Revolving Credit Facility⁽⁶⁾	Variable	2.93	%		February 2024	—
Corporate Credit Facility Term Loan	Partially Fixed⁽⁷⁾	3.92	%		September 2024	125,000
Total Corporate Credit Facilities		3.92	%	⁽⁵⁾		$	125,000
2020 Senior Notes	Fixed	6.38	%		August 2025	500,000
2021 Senior Notes	Fixed	4.88	%		June 2029	500,000
Loan premiums, discounts and unamortized deferred premium financing costs, net⁽⁸⁾						(22,270)
Total Debt, net of loan premiums, discounts and unamortized deferred financing costs		5.12	%	⁽⁵⁾		$	1,494,105


1.	The rates shown represent the annual interest rates as of June 30, 2021. The variable index for secured mortgage loans is one-month LIBOR and the variable index for corporate credit facilities reflects a 25 basis point LIBOR floor which is applicable for the value of all corporate credit facilities not subject to an interest rate hedge.

2.	A variable interest loan for which the interest rate has been fixed through October 2022, after which the rate reverts to variable.

3.	A variable interest loan for which the interest rate has been fixed on $25 million of the balance through October 2022, after which the rate reverts to variable.

4.	A variable interest loan for which the interest rate has been fixed through January 2023.

5.	Weighted-average interest rate as of June 30, 2021.

6.	The Revolving Credit Facility has total commitments of $523 million through February 2022, after which the total commitments will decrease to $450 million through February 2024.

7.	A variable interest loan for which LIBOR has been fixed through September 2022. The spread to LIBOR may vary, as it is determined by the Company’s leverage ratio. The applicable interest rate has been set to the highest level of grid-based pricing during the covenant waiver period.

8.	Includes loan premiums, discounts and deferred financing costs, net of accumulated amortization.

Xenia Hotels & Resorts, Inc. Same-Property⁽¹⁾ Hotel EBITDA and Hotel EBITDA Margin For the Three and Six Months Ended June 30, 2021 and 2020 ($ amounts in thousands)

	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2020			Change		2021			2020			Change
Same-Property Occupancy⁽¹⁾	51.4		%	3.9		%	4,750	bps	43.1		%	30.5		%	1,260	bps
Same-Property Average Daily Rate⁽¹⁾	$	215.01		$	184.17		16.7	%	$	204.44		$	224.85		(9.1)	%
Same-Property RevPAR⁽¹⁾	$	110.45		$	7.19		1,436.2	%	$	88.20		$	68.56		28.6	%
Same-Property Revenues⁽¹⁾:
Rooms revenues	$	94,588		$	6,158		1,436.0	%	$	150,233		$	117,445		27.9	%
Food and beverage revenues	40,062			2,061			1,843.8	%	61,651			69,989			(11.9)	%
Other revenues	16,528			5,641			193.0	%	27,114			21,448			26.4	%
Total Same-Property revenues	$	151,178		$	13,860		990.8	%	$	238,998		$	208,882		14.4	%
Same-Property Expenses⁽¹⁾:
Rooms expenses	$	22,112		$	6,207		256.2	%	$	37,576		$	36,527		2.9	%
Food and beverage expenses	28,427			7,169			296.5	%	46,479			55,686			(16.5)	%
Other direct expenses	4,736			1,440			228.9	%	7,934			6,470			22.6	%
Other indirect expenses	42,682			23,181			84.1	%	79,196			84,296			(6.1)	%
Management and franchise fees	6,117			(188)			3,353.7	%	8,959			6,227			43.9	%
Real estate taxes, personal property taxes and insurance	10,381			11,270			(7.9)	%	21,621			22,968			(5.9)	%
Ground lease expense	393			310			26.8	%	808			1,002			(19.4)	%
Total Same-Property hotel operating expenses	$	114,848		$	49,389		132.5	%	$	202,573		$	213,176		(5.0)
															%
Same-Property Hotel EBITDA⁽¹⁾	$	36,330		$	(35,529)		202.3	%	$	36,425		$	(4,294)		948.3	%
Same-Property Hotel EBITDA Margin⁽¹⁾	24.0		%	(256.3)		%	28,037	bps	15.2		%	(2.1)		%	1,730	bps


1.	“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center. Includes hotels that had temporarily suspended operations for a portion of the three and six months ended June 30, 2020. “Same-Property” also includes disruption from the COVID-19 pandemic in 2021 and 2020 results and renovation disruption for multiple capital projects during the periods presented. The following is a reconciliation of Total Revenues and Total Hotel Operating Expenses consolidated on a GAAP basis to Total Same-Property Revenues and Total Same-Property Hotel Operating Expenses for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Total Revenues – GAAP	$	151,974	$	14,825	$	239,826	$	230,176
Total revenues from sold hotels	—		(935)		—		(17,864)
Pro forma other revenues adjustments	(796)		(30)		(828)		(3,430)
Total Same-Property Revenues	$	151,178	$	13,860	$	238,998	$	208,882

Total Hotel Operating Expenses – GAAP	$	105,903	$	42,929	$	182,987	$	213,789
Real estate taxes, personal property taxes and insurance	10,997		13,097		21,537		26,772
Ground lease expense, net^(a)	393		310		808		1,002
Other income	(64)		(75)		(128)		(128)
Corporate-level costs and expenses	(209)		(310)		(253)		(773)
Pro forma hotel level adjustments, net^(b)	(2,172)		(6,562)		(2,378)		(27,486)
Total Same-Property Hotel Operating Expenses	$	114,848	$	49,389	$	202,573	$	213,176


a.	Excludes non-cash ground rent expense.

b.	Includes adjustments for hotel expenses from sold hotels and for Hyatt Regency Portland at the Oregon Convention Center, which is not included in Same-Property amounts.

Xenia Hotels & Resorts, Inc. Same-Property⁽¹⁾ Hotel EBITDA and Hotel EBITDA Margin For the Three and Six Months Ended June 30, 2021 and 2019 ($ amounts in thousands)

	Three Months Ended June 30,								Six Months Ended June 30,
	2021			2019			Change		2021			2019			Change
Same-Property Occupancy⁽¹⁾	51.4		%	79.8		%	(2,840)	bps	43.1		%	78.0		%	(3,490)	bps
Same-Property Average Daily Rate⁽¹⁾	$	215.01		$	225.71		(4.7)	%	$	204.44		$	230.27		(11.2)	%
Same-Property RevPAR⁽¹⁾	$	110.45		$	180.05		(38.7)	%	$	88.20		$	179.66		(50.9)	%
Same-Property Revenues⁽¹⁾:
Rooms revenues	$	94,588		$	154,211		(38.7)	%	$	150,233		$	306,066		(50.9)	%
Food and beverage revenues	40,062			88,735			(54.9)	%	61,651			183,962			(66.5)	%
Other revenues	16,528			18,218			(9.3)	%	27,114			35,333			(23.3)	%
Total Same-Property revenues	$	151,178		$	261,164		(42.1)	%	$	238,998		$	525,361		(54.5)	%
Same-Property Expenses⁽¹⁾:
Rooms expenses	$	22,112		$	35,706		(38.1)	%	$	37,576		$	71,290		(47.3)	%
Food and beverage expenses	28,427			57,832			(50.8)	%	46,479			116,554			(60.1)	%
Other direct expenses	4,736			6,755			(29.9)	%	7,934			13,110			(39.5)	%
Other indirect expenses	42,682			61,716			(30.8)	%	79,196			123,942			(36.1)	%
Management and franchise fees	6,117			9,986			(38.7)	%	8,959			20,673			(56.7)	%
Real estate taxes, personal property taxes and insurance	10,381			10,586			(1.9)	%	21,621			21,362			1.2	%
Ground lease expense	393			1,047			(62.5)	%	808			2,026			(60.1)	%
Total Same-Property hotel operating expenses	$	114,848		$	183,628		(37.5)	%	$	202,573		$	368,957		(45.1)	%
Same-Property Hotel EBITDA⁽¹⁾	$	36,330		$	77,536		(53.1)	%	$	36,425		$	156,404		(76.7)	%
Same-Property Hotel EBITDA Margin⁽¹⁾	24.0		%	29.7		%	(570)	bps	15.2		%	29.8		%	(1,460)	bps


1.	“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center. Includes disruption from the COVID-19 pandemic in 2021 results and renovation disruption for multiple capital projects during the periods presented. The following is a reconciliation of Total Revenues and Total Hotel Operating Expenses consolidated on a GAAP basis to Total Same-Property Revenues and Total Same-Property Hotel Operating Expenses for the three and six months ended June 30, 2021 and 2019:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2019		2021		2019
Total Revenues – GAAP	$	151,974	$	304,285	$	239,826	$	597,972
Total revenues from sold hotels	—		(43,121)		—		(72,611)
Pro forma other revenues adjustments	(796)		—		(828)		—
Total Same-Property Revenues	$	151,178	$	261,164	$	238,998	$	525,361

Total Hotel Operating Expenses – GAAP	$	105,903	$	196,984	$	182,987	$	392,873
Real estate taxes, personal property taxes and insurance	10,997		12,577		21,537		25,636
Ground lease expense, net^(a)	393		1,047		808		2,026
Other income	(64)		(63)		(128)		(125)
Pre-opening expenses	—		142		—		142
Corporate-level costs and expenses	(209)		(449)		(253)		(1,336)
Pro forma hotel level adjustments, net^(b)	(2,172)		(26,610)		(2,378)		(50,259)
Total Same-Property Hotel Operating Expenses	$	114,848	$	183,628	$	202,573	$	368,957


a.	Excludes non-cash ground rent expense.

b.	Includes adjustments for hotel expenses from sold hotels and for Hyatt Regency Portland at the Oregon Convention Center, which is not included in Same-Property amounts.

Xenia Hotels & Resorts, Inc. Same-Property⁽¹⁾ Portfolio Data by Market

Market⁽²⁾	% of 2019 Hotel EBITDA⁽³⁾	Number of Hotels	Number of Rooms
Houston, TX	12%	3	1,220
Orlando, FL	12%	3	1,141
Phoenix, AZ	11%	2	612
Dallas, TX	9%	2	961
San Francisco/San Mateo, CA	9%	1	688
San Jose/Santa Cruz, CA	7%	1	505
Atlanta, GA	6%	2	649
San Diego, CA	5%	2	486
Denver, CO	4%	2	391
Washington, DC-MD-VA	4%	2	472
Other	21%	14	2,286
Same-Property⁽¹⁾	100%	34	9,411
Hyatt Regency Portland at the Oregon Convention Center		1	600
Total Portfolio		35	10,011


1.	“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center.

2.	As defined by STR, Inc.

3.	Based on Hotel EBITDA for the year ended December 31, 2019 as results for the year ended December 31, 2020 are not representative of typical operating results.

Xenia Hotels & Resorts, Inc. Same-Property⁽¹⁾ Portfolio Data by Market For the Three and Six Months Ended June 30, 2021 and 2019

	Three Months Ended						Three Months Ended
	June 30, 2021						June 30, 2019						% Change
	Occupancy		ADR		RevPAR		Occupancy		ADR		RevPAR		RevPAR
Market
Houston, TX	54.8	%	$	190.71	$	104.59	73.9	%	$	185.41	$	137.03	(23.7)	%
Orlando, FL	62.3	%	179.30		111.69		77.4	%	190.38		147.28		(24.2)	%
Phoenix, AZ	55.0	%	311.55		171.23		76.2	%	259.10		197.35		(13.2)	%
Dallas, TX	45.7	%	127.29		58.11		75.0	%	188.51		141.44		(58.9)	%
San Francisco/San Mateo, CA	38.1	%	147.25		56.08		93.7	%	240.62		225.55		(75.1)	%
San Jose/Santa Cruz, CA	23.3	%	113.34		26.46		86.7	%	255.16		221.24		(88.0)	%
Atlanta, GA	51.5	%	196.15		101.03		79.2	%	186.44		147.69		(31.6)	%
San Diego, CA	38.7	%	330.70		127.84		75.3	%	260.64		196.30		(34.9)	%
Denver, CO	55.7	%	265.28		147.79		84.3	%	270.72		228.34		(35.3)	%
Washington, DC-MD-VA	44.0	%	220.69		97.00		81.7	%	259.13		211.76		(54.2)	%
Other	59.1	%	251.87		148.96		81.2	%	245.03		199.09		(25.2)	%
Total	51.4	%	$	215.01	$	110.45	79.8	%	$	225.71	$	180.05	(38.7)	%


	Six Months Ended						Six Months Ended
	June 30, 2021						June 30, 2019						% Change
	Occupancy		ADR		RevPAR		Occupancy		ADR		RevPAR		RevPAR
Market
Houston, TX	50.8	%	$	172.64	$	87.77	73.8	%	$	183.64	$	135.51	(35.2)	%
Orlando, FL	52.1	%	170.14		88.58		80.5	%	209.26		168.44		(47.4)	%
Phoenix, AZ	48.0	%	334.92		160.62		79.0	%	318.52		251.56		(36.2)	%
Dallas, TX	37.5	%	118.63		44.49		73.6	%	193.92		142.74		(68.8)	%
San Francisco/San Mateo, CA	27.9	%	143.19		39.88		92.0	%	247.30		227.60		(82.5)	%
San Jose/Santa Cruz, CA	18.4	%	107.64		19.82		83.2	%	266.40		221.61		(91.1)	%
Atlanta, GA	44.9	%	185.09		83.18		77.4	%	201.39		155.93		(46.7)	%
San Diego, CA	28.0	%	302.13		84.68		72.4	%	264.14		191.22		(55.7)	%
Denver, CO	46.7	%	245.44		114.66		77.6	%	258.58		200.76		(42.9)	%
Washington, DC-MD-VA	36.8	%	202.58		74.52		76.6	%	243.11		186.25		(60.0)	%
Other	49.1	%	238.87		117.33		77.0	%	234.67		180.71		(35.1)	%
Total	43.1	%	$	204.44	$	88.20	78.0	%	$	230.27	$	179.66	(50.9)	%


1.	“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center.

Xenia Hotels & Resorts, Inc. Same-Property⁽¹⁾ Historical Operating Data ($ amounts in thousands, except ADR and RevPAR)

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
	2021			2021			2021			2021			2021

Occupancy	34.8		%	51.4		%
ADR	$	188.68		$	215.01
RevPAR	$	65.70		$	110.45

Hotel Revenues	$	87,820		$	151,178
Hotel EBITDA	$	95		$	36,330
Hotel EBITDA Margin	0.1		%	24.0		%

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
	2020			2020			2020			2020			2020
Occupancy	57.1		%	3.9		%	24.4		%	27.8		%	28.3		%
ADR	$	227.63		$	184.17		$	172.25		$	182.64		$	203.00
RevPAR	$	129.93		$	7.19		$	42.09		$	50.82		$	57.45

Hotel Revenues	$	195,022		$	13,860		$	57,710		$	73,723		$	340,314
Hotel EBITDA	$	31,235		$	(35,529)		$	(14,595)		$	(2,938)		$	(21,826)
Hotel EBITDA Margin	16.0		%	(256.3)		%	(25.3)		%	(4.0)		%	(6.4)		%

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
	2019			2019			2019			2019			2019
Occupancy	76.3		%	79.8		%	76.2		%	72.9		%	76.3		%
ADR	$	235.10		$	225.71		$	210.91		$	221.40		$	223.26
RevPAR	$	179.27		$	180.05		$	160.79		$	161.36		$	170.29

Hotel Revenues	$	264,198		$	261,164		$	227,522		$	247,313		$	1,000,197
Hotel EBITDA	$	78,868		$	77,536		$	53,099		$	66,149		$	275,652
Hotel EBITDA Margin	29.9		%	29.7		%	23.3		%	26.7		%	27.6		%

“Same-Property” includes all hotels owned as of June 30, 2021, except for Hyatt Regency Portland at the Oregon Convention Center. Includes hotels that had temporarily suspended operations for a portion of the year ended December 31, 2020, as if all hotels rooms were available for sale. “Same-Property” also includes renovation disruption for multiple capital projects during the periods presented and disruption from the COVID-19 pandemic in 2021 and 2020.

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SOURCE Xenia Hotels & Resorts, Inc.

August 3, 2021 6:33 am

Immunic, Inc. to Participate in Investor Conferences in August

PR Newswire

NEW YORK, Aug. 3, 2021 /PRNewswire/ — Immunic, Inc. (Nasdaq: IMUX), a clinical-stage biopharmaceutical company developing a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases, today announced participation in the following investor conferences in August:

August 9-10: BTIG Virtual Biotechnology Conference 2021. Daniel Vitt, Ph.D., Chief Executive Officer and President of Immunic, will participate in a fireside chat on Monday, August 9, at 11:30 am ET.
August 10-11: 2021 Wedbush PacGrow Healthcare VirtualConference. Dr. Vitt will participate in a fireside chat on Tuesday, August 10, at 8:00 am ET. A live audio webcast of the presentation will be available on the “Events and Presentations” section of Immunic’s website at: ir.imux.com/events-and-presentations. An archived replay will be available on the company’s website for a period of 90 days.

About Immunic, Inc.
Immunic, Inc. (Nasdaq: IMUX) is a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases. The company is developing three small molecule products: its lead development program, IMU-838, a selective immune modulator that inhibits the intracellular metabolism of activated immune cells by blocking the enzyme DHODH and exhibits a host-based antiviral effect, is currently being developed as a treatment option for multiple sclerosis, ulcerative colitis, Crohn’s disease, and primary sclerosing cholangitis. IMU-935, a selective inverse agonist of the transcription factor RORγt, is targeted for development in psoriasis, castration-resistant prostate cancer and Guillain-Barré syndrome. IMU-856, which targets the restoration of the intestinal barrier function, is targeted for development in diseases involving bowel barrier dysfunction. For further information, please visit: www.imux.com.

Cautionary Statement Regarding Forward-Looking Statements
This press release contains “forward-looking statements” that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this press release regarding strategy, future operations, future financial position, future revenue, projected expenses, prospects, plans and objectives of management are forward-looking statements. Examples of such statements include, but are not limited to, statements relating to management’s participation in investor conferences. Immunic may not actually achieve the plans, carry out the intentions or meet the expectations or projections disclosed in the forward-looking statements and you should not place undue reliance on these forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors, including, without limitation, the COVID-19 pandemic, risks and uncertainties associated with the ability to project future cash utilization and reserves needed for contingent future liabilities and business operations, the availability of sufficient resources to meet business objectives and operational requirements, the fact that the results of earlier studies and trials may not be predictive of future clinical trial results, the protection and market exclusivity provided by Immunic’s intellectual property, risks related to the drug development and the regulatory approval process and the impact of competitive products and technological changes. A further list and descriptions of these risks, uncertainties and other factors can be found in the section captioned “Risk Factors,” in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 26, 2021, and in the company’s subsequent filings with the Securities and Exchange Commission. Copies of these filings are available online at www.sec.gov or ir.imux.com/sec-filings. Any forward-looking statement made in this release speaks only as of the date of this release. Immunic disclaims any intent or obligation to update these forward-looking statements to reflect events or circumstances that exist after the date on which they were made. Immunic expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this press release.

Contact Information

Immunic, Inc.

Jessica Breu

Head of Investor Relations and Communications
+49 89 2080 477 09
[email protected]

US IR Contact
Rx Communications Group
Paula Schwartz
+1 917 322 2216
[email protected]

US Media Contact

KOGS Communication

Edna Kaplan

+1 781 639 1910

[email protected]

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SOURCE Immunic, Inc.

August 3, 2021 6:33 am

Zimmer Biomet Announces Second Quarter 2021 Financial Results

– Second quarter net sales of $2.027 billion increased 65.3%, 60.7% on a constant currency(1) basis

– Second quarter diluted earnings per share were $0.67; adjusted(1) diluted earnings per share were $1.90

– Company updates 2021 financial guidance, narrowing range for full year outlook

PR Newswire

WARSAW, Ind., Aug. 3, 2021 /PRNewswire/ — Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended June 30, 2021. The Company reported second quarter net sales of $2.027 billion, an increase of 65.3% over the prior year period, and an increase of 60.7% on a constant currency basis. Second quarter 2021 net sales increased 1.9% when compared to the pre-pandemic second quarter 2019, and were flat on a constant currency basis. Net earnings for the second quarter of 2021 were $141.9 million, or $400.5 million on an adjusted basis.

Diluted earnings per share were $0.67 for the second quarter. Adjusted diluted earnings per share were $1.90 for the second quarter.

“Our performance in the second quarter improved meaningfully from the first quarter 2021 across all regions and product categories as recovery from the global pandemic continued to take hold. While we anticipate some ongoing COVID-19 pressure, we expect continued improvement in procedure volume recovery through the second half of 2021,” said Bryan Hanson, Chairman, President and CEO of Zimmer Biomet. “Against this backdrop, Zimmer Biomet has continued to execute, investing in our business, expanding our portfolio and developing and launching innovative products designed to improve mobility and health. This execution enables ZB to build and deliver value for our customers and shareholders and to move our mission forward for the patients we ultimately serve.”

Please see the attached schedules accompanying this press release for additional details on performance in the quarter, including sales by Zimmer Biomet’s three geographies and five product categories.

_________________________
¹ Reconciliations of these measures to the corresponding U.S. generally accepted accounting principles measures are included in this press release.

Recent Highlights

Aligned with the ongoing transformation of Zimmer Biomet’s business, key recent highlights include:

Publication of the Zimmer Biomet Sustainability Report, aligned with Sustainability Accounting Standards Board (SASB) standards.
Receipt of key awards for Zimmer Biomet’s portfolio including the ROSA Knee system for Best Technology Solution in Orthopedics by the Medtech Breakthrough Awards and Orthopaedic Product Innovation of the Year by the Healthcare Asia Medtech Awards. The Tether^TMVertebral Body Tethering System, a first-in-class treatment for children with scoliosis, was also Silver Winner in the 2021 Edison Best New Product Awards in the Advanced Surgical Instruments category.
Key additions to the Zimmer Biomet Leadership Team, including the appointment of Wilfred van Zuilen as President of Europe, Middle East and Africa (EMEA) and Nitin Goyal, M.D. to the newly created role of Chief Science, Technology and Innovation Officer.

Geographic and Product Category Sales

The following sales tables provide results by geography and product category for the three and six-month periods ended June 30, 2021, as well as the percentage change compared to the prior year period, on both a reported basis and a constant currency basis.

NET SALES – THREE MONTHS ENDED JUNE 30, 2021
(in millions, unaudited)


						Constant
	Net					Currency
	Sales		% Change			% Change
Geographic Results
Americas	$	1,239.6		69.0	%		68.3	%
EMEA		429.8		96.4			80.5
Asia Pacific		357.5		30.6			24.4
Total	$	2,026.9		65.3	%		60.7	%
Product Categories
Knees
Americas	$	400.3		81.4	%		80.6	%
EMEA		148.6		127.2			109.6
Asia Pacific		116.7		31.2			23.8
Total		665.6		77.5			72.2
Hips
Americas		258.1		51.3			50.4
EMEA		122.5		72.8			59.0
Asia Pacific		94.0		6.6			3.9
Total		474.6		44.0			39.9
S.E.T. *		462.1		57.9			53.0
Dental & Spine		263.5		73.1			69.4
Other		161.1		110.9			105.9
Total	$	2,026.9		65.3	%		60.7	%


* Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic

NET SALES – SIX MONTHS ENDED JUNE 30, 2021 (in millions, unaudited)


						Constant
	Net					Currency
	Sales		% Change			% Change
Geographic Results
Americas	$	2,354.6		28.3	%		27.9	%
EMEA		814.0		32.0			21.9
Asia Pacific		705.7		26.4			19.9
Total	$	3,874.3		28.7	%		25.2	%
Product Categories
Knees
Americas	$	759.1		26.8	%		26.3	%
EMEA		279.9		28.4			19.0
Asia Pacific		240.9		29.0			21.0
Total		1,279.9		27.5			23.7
Hips
Americas		493.3		22.4			21.9
EMEA		230.2		26.3			17.1
Asia Pacific		198.1		12.0			7.6
Total		921.6		20.9			17.4
S.E.T. *		879.7		30.6			27.1
Dental & Spine		509.5		37.1			34.1
Other		283.6		42.9			39.2
Total	$	3,874.3		28.7	%		25.2	%


* Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic

Financial Guidance

The Company is updating its full-year 2021 financial guidance to narrow its previous projected ranges for revenue growth and adjusted diluted EPS:

Projected Year Ending December 31, 2021
	Previous Guidance	Updated Guidance
2021 reported revenue growth	14.0% – 17.0%	14.5% – 16.5%
Foreign Currency Exchange Impact	1.5%	1.5%
Adjusted Operating Profit Margin⁽¹⁾	26.5% – 27.5%	26.5% – 27.0%
Adjusted Tax Rate⁽¹⁾	16.0% – 16.5%	16.0% – 16.5%
Adjusted Diluted EPS⁽¹⁾	$7.60 – $8.00	$7.65 – $7.95

⁽¹⁾	These measures are non-GAAP financial measures for which a reconciliation to the most directly comparable GAAP financial measure is not available without unreasonable efforts. See “Forward-Looking Non-GAAP Financial Measures.”

Conference Call

The Company will conduct its second quarter investor conference call today, August 3, 2021, at 8:30 a.m. ET. The audio webcast can be accessed via Zimmer Biomet’s Investor Relations website at https://investor.zimmerbiomet.com. It will be archived for replay following the conference call.

About the Company

Zimmer Biomet is a global medical technology leader with a comprehensive portfolio designed to maximize mobility and improve health. We seamlessly transform the patient experience through our innovative products and suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence.

With 90+ years of trusted leadership and proven expertise, Zimmer Biomet is positioned to deliver the highest quality solutions to patients and providers. Our legacy continues to come to life today through our progressive culture of evolution and innovation.

For more information about our product portfolio, our operations in 25+ countries and sales in 100+ countries or about joining our team, visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet.

Website Information

We routinely post important information for investors on our website, www.zimmerbiomet.com, in the “Investor Relations” section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website or any other website referenced herein is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures

This press release includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.

Sales change information for the three and six-month periods ended June 30, 2021 is presented on a GAAP (reported) basis and on a constant currency basis. Constant currency percentage changes exclude the effects of foreign currency exchange rates. They are calculated by translating current and prior-period sales at the same predetermined exchange rate. The translated results are then used to determine year-over-year percentage increases or decreases.

Net earnings and diluted earnings per share for the three and six-month periods ended June 30, 2021 are presented on a GAAP (reported) basis and on an adjusted basis. Adjusted earnings and adjusted diluted earnings per share exclude the effects of certain items, which are detailed in the reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures presented later in this press release.

Free cash flow is an additional non-GAAP measure that is presented in this press release. Free cash flow is computed by deducting additions to instruments and other property, plant and equipment from net cash provided by operating activities.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this press release. This press release also contains supplemental reconciliations of additional non-GAAP financial measures that the Company presents in other contexts. These additional non-GAAP financial measures are computed from the most directly comparable GAAP financial measure as indicated in the applicable reconciliation.

Management uses non-GAAP financial measures internally to evaluate the performance of the business. Additionally, management believes these non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company. Management believes these measures offer the ability to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported income but that do not impact the fundamentals of our operations. The non-GAAP measures enable the evaluation of operating results and trend analysis by allowing a reader to better identify operating trends that may otherwise be masked or distorted by these types of items that are excluded from the non-GAAP measures. In addition, constant currency sales changes, adjusted operating profit, adjusted diluted earnings per share and free cash flow are used as performance metrics in our incentive compensation programs.

Forward-Looking Non-GAAP Financial Measures

This press release also includes certain forward-looking non-GAAP financial measures for the year ending December 31, 2021. We calculate forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For instance, we exclude the impact of certain charges related to initial compliance with the European Union Medical Device Regulation; restructuring and other cost reduction initiatives; quality remediation; acquisition, integration, divestiture and related; and certain legal and tax matters. We have not provided quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because the excluded items are not available on a prospective basis without unreasonable efforts. For example, the timing of certain transactions is difficult to predict because management’s plans may change. In addition, the company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors. It is probable that these forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.

Cautionary Note Regarding Forward-Looking Statements

This press release contains
forward-looking statements
within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995
, including statements regarding sales and earnings guidance, the impact of the COVID-19 pandemic on our business, including any continued recovery, and any statements about our forecasts, expectations, plans, intentions, strategies or prospects. All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements. Such statements are based upon the current beliefs, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to: the effects of the COVID-19 global pandemic and other adverse public health developments on the global economy, our business and operations and the business and operations of our suppliers and customers, including the deferral of elective surgical procedures and our ability to collect accounts receivable; the failure of vaccine rollouts and other strategies to mitigate or reverse the impacts of the COVID-19 pandemic; the failure of elective surgical procedures to recover at the levels or on the timeline anticipated; the risks and uncertainties related to our ability to successfully execute our restructuring plans; our ability to attract, retain and develop the highly skilled employees we need to support our business; the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; the risks and uncertainties associated with the proposed spin-off of our Spine and Dental businesses, including, without limitation, the significant expenses, time and efforts related to implementing such transaction, the ability to complete the transaction on our expected timeline or at all, the tax-free nature of the transaction, possible disruptions in our relationships with customers, suppliers and other business partners, and the possibility that the anticipated benefits and synergies of the transaction, strategic and competitive advantages of each company, and future growth and other opportunities for each company will not be realized within the expected time periods or at all; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; the ability to remediate matters identified in inspectional observations or warning letters issued by the U.S. Food and Drug Administration (FDA), while continuing to satisfy the demand for our products; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the FDA and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors and cost containment efforts sponsored by government agencies, legislative bodies, the private sector and healthcare purchasing organizations, including the volume-based procurement process in China; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; the ability to obtain and maintain adequate intellectual property protection; breaches or failures of our information technology systems or products, including by cyberattack, unauthorized access or theft; the ability to form and implement alliances; changes in tax obligations arising from tax reform measures, including European Union rules on state aid, or examinations by tax authorities; product liability, intellectual property and commercial litigation losses; changes in general industry and market conditions, including domestic and international growth rates; changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing financial and political uncertainty on countries in the Euro zone on the ability to collect accounts receivable in affected countries. A further list and description of these risks and uncertainties and other factors can be found in our Annual Report on Form 10-K for the year ended December 31, 2020, including in the sections captioned “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and our subsequent filings with the Securities and Exchange Commission (SEC). Copies of these filings are available online at www.sec.gov, www.zimmerbiomet.com or on request from us.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our filings with the SEC.
Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers of this press release are cautioned not to rely on these forward-looking statements since there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary note is applicable to all forward-looking statements contained in this press release.

Media	Investors
Meredith Weissman	Keri Mattox
(703) 346-3127	(215) 275-2431
[email protected]	[email protected]

	Ezgi Yagci
	(617) 549-2443
	[email protected]


ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2021 and 2020
(in millions, except per share amounts, unaudited)

	2021		2020
Net Sales	$	2,026.9	$	1,226.1
Cost of products sold, excluding intangible asset amortization		581.6		424.5
Intangible asset amortization		154.6		147.7
Research and development		180.5		87.7
Selling, general and administrative		817.4		665.0
Goodwill and intangible asset impairment		16.3		33.0
Restructuring and other cost reduction initiatives		19.6		28.0
Quality remediation		11.0		9.7
Acquisition, integration, divestiture and related		25.4		2.2
Operating expenses		1,806.4		1,397.8
Operating Profit (Loss)		220.5		(171.7)
Other income, net		8.1		3.8
Interest expense, net		(54.7)		(54.0)
Earnings (loss) before income taxes		173.9		(221.9)
Provision (benefit) for income taxes		31.4		(13.7)
Net Earnings (Loss)		142.5		(208.2)
Less: Net earnings (loss) attributable to noncontrolling interest		0.6		(1.6)
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.	$	141.9	$	(206.6)
Earnings (Loss) Per Common Share
Basic	$	0.68	$	(1.00)
Diluted	$	0.67	$	(1.00)
Weighted Average Common Shares Outstanding
Basic		208.6		206.8
Diluted		210.7		206.8


ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 and 2020
(in millions, except per share amounts, unaudited)

	2021		2020
Net Sales	$	3,874.3	$	3,009.9
Cost of products sold, excluding intangible asset amortization		1,098.0		911.6
Intangible asset amortization		310.1		295.3
Research and development		274.9		186.1
Selling, general and administrative		1,587.5		1,493.9
Goodwill and intangible asset impairment		16.3		645.0
Restructuring and other cost reduction initiatives		41.4		73.0
Quality remediation		21.2		26.1
Acquisition, integration, divestiture and related		38.8		6.6
Operating expenses		3,388.2		3,637.6
Operating Profit (Loss)		486.1		(627.7)
Other income, net		15.4		6.8
Interest expense, net		(107.0)		(104.9)
Earnings (loss) before income taxes		394.5		(725.8)
Provision (benefit) for income taxes		54.3		(8.5)
Net Earnings (Loss)		340.2		(717.3)
Less: Net earnings (loss) attributable to noncontrolling interest		0.2		(2.2)
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.	$	340.0	$	(715.1)
Earnings (Loss) Per Common Share
Basic	$	1.63	$	(3.46)
Diluted	$	1.62	$	(3.46)
Weighted Average Common Shares Outstanding
Basic		208.3		206.6
Diluted		210.4		206.6

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)

	June 30,		December 31,
	2021		2020
Assets
Cash and cash equivalents	$	1,042.4	$	802.1
Receivables, net		1,420.4		1,452.7
Inventories		2,533.0		2,450.7
Other current assets		361.0		377.8
Total current assets		5,356.8		5,083.3
Property, plant and equipment, net		2,005.2		2,047.7
Goodwill		9,247.6		9,261.8
Intangible assets, net		6,642.7		7,055.5
Other assets		970.9		969.4
Total Assets	$	24,223.2	$	24,417.7
Liabilities and Stockholders’ Equity
Current liabilities	$	1,878.5	$	2,056.9
Current portion of long-term debt		1,050.0		500.0
Other long-term liabilities		1,908.9		2,034.9
Long-term debt		6,802.5		7,626.5
Stockholders’ equity		12,583.3		12,199.4
Total Liabilities and Stockholders’ Equity	$	24,223.2	$	24,417.7

ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 and 2020
(in millions, unaudited)

	2021		2020
Cash flows provided by (used in) operating activities
Net earnings (loss)	$	340.2	$	(717.3)
Depreciation and amortization		535.2		508.7
Share-based compensation		46.4		38.3
Goodwill and intangible asset impairment		16.3		645.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		(37.3)		(46.1)
Receivables		5.3		272.7
Inventories		(94.4)		(122.6)
Accounts payable and accrued expenses		(56.3)		(233.9)
Other assets and liabilities		(55.0)		53.3
Net cash provided by operating activities		700.4		398.1
Cash flows provided by (used in) investing activities
Additions to instruments		(150.5)		(159.3)
Additions to other property, plant and equipment		(54.7)		(59.2)
Net investment hedge settlements		(9.6)		26.8
Investments in other assets		(17.4)		(14.8)
Net cash used in investing activities		(232.2)		(206.5)
Cash flows provided by (used in) financing activities
Proceeds from senior notes		–		1,497.1
Redemption of senior notes		(200.0)		(1,500.0)
Dividends paid to stockholders		(99.8)		(99.1)
Proceeds from employee stock compensation plans		91.5		61.7
Net cash flows from unremitted collections from factoring programs		–		(19.6)
Business combination contingent consideration payments		(6.5)		(7.5)
Debt issuance costs		–		(19.4)
Other financing activities		(9.3)		(6.1)
Net cash used in financing activities		(224.1)		(92.9)
Effect of exchange rates on cash and cash equivalents		(3.8)		(3.2)
Increase in cash and cash equivalents		240.3		95.5
Cash and cash equivalents, beginning of period		802.1		617.9
Cash and cash equivalents, end of period	$	1,042.4	$	713.4

ZIMMER BIOMET HOLDINGS, INC. NET SALES BY GEOGRAPHY FOR THE THREE MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)

	Three Months Ended June 30,
	2021		2020		% Inc			Volume / Mix			Price			Foreign Exchange
Americas	$	1,239.6	$	733.7		69.0	%		70.0	%		(1.7)	%		0.7	%
EMEA		429.8		218.7		96.4			80.5			–			15.9
Asia Pacific		357.5		273.7		30.6			26.3			(1.9)			6.2
Total	$	2,026.9	$	1,226.1		65.3	%		62.2	%		(1.5)	%		4.6	%

ZIMMER BIOMET HOLDINGS, INC. NET SALES BY PRODUCT CATEGORY FOR THE THREE MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)

	Three Months Ended June 30,
	2021		2020		% Inc			Volume / Mix			Price			Foreign Exchange
Knees	$	665.6	$	375.0		77.5	%		74.3	%		(2.1)	%		5.3	%
Hips		474.6		329.7		44.0			42.4			(2.5)			4.1
S.E.T.		462.1		292.7		57.9			52.3			0.7			4.9
Dental & Spine		263.5		152.3		73.1			70.3			(0.9)			3.7
Other		161.1		76.4		110.9			109.3			(3.4)			5.0
Total	$	2,026.9	$	1,226.1		65.3	%		62.2	%		(1.5)	%		4.6	%

ZIMMER BIOMET HOLDINGS, INC. NET SALES BY GEOGRAPHY FOR THE SIX MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)

	Six Months Ended June 30,
	2021		2020		% Inc			Volume / Mix			Price			Foreign Exchange
Americas	$	2,354.6	$	1,835.0		28.3	%		30.0	%		(2.1)	%		0.4	%
EMEA		814.0		616.8		32.0			22.1			(0.2)			10.1
Asia Pacific		705.7		558.1		26.4			21.3			(1.4)			6.5
Total	$	3,874.3	$	3,009.9		28.7	%		26.8	%		(1.6)	%		3.5	%

ZIMMER BIOMET HOLDINGS, INC. NET SALES BY PRODUCT CATEGORY FOR THE SIX MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)

	Six Months Ended June 30,
	2021		2020		% Inc			Volume / Mix			Price			Foreign Exchange
Knees	$	1,279.9	$	1,003.7		27.5	%		25.9	%		(2.2)	%		3.8	%
Hips		921.6		762.3		20.9			20.0			(2.6)			3.5
S.E.T.		879.7		673.6		30.6			26.8			0.3			3.5
Dental & Spine		509.5		371.8		37.1			35.1			(1.0)			3.0
Other		283.6		198.5		42.9			41.1			(1.9)			3.7
Total	$	3,874.3	$	3,009.9		28.7	%		26.8	%		(1.6)	%		3.5	%

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF REPORTED NET SALES % CHANGE TO CONSTANT CURRENCY % CHANGE (unaudited)


	For the Three Months Ended
	June 30, 2021
				Foreign			Constant
				Exchange			Currency
	% Change			Impact			% Change
Geographic Results
Americas		69.0	%		0.7	%		68.3	%
EMEA		96.4			15.9			80.5
Asia Pacific		30.6			6.2			24.4
Total		65.3	%		4.6	%		60.7	%
Product Categories
Knees
Americas		81.4	%		0.8	%		80.6	%
EMEA		127.2			17.6			109.6
Asia Pacific		31.2			7.4			23.8
Total		77.5			5.3			72.2
Hips
Americas		51.3			0.9			50.4
EMEA		72.8			13.8			59.0
Asia Pacific		6.6			2.7			3.9
Total		44.0			4.1			39.9
S.E.T		57.9			4.9			53.0
Dental & Spine		73.1			3.7			69.4
Other		110.9			5.0			105.9
Total		65.3	%		4.6	%		60.7	%

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF REPORTED NET SALES % CHANGE TO CONSTANT CURRENCY % CHANGE (unaudited)


	For the Six Months Ended
	June 30, 2021
				Foreign			Constant
				Exchange			Currency
	% Change			Impact			% Change
Geographic Results
Americas		28.3	%		0.4	%		27.9	%
EMEA		32.0			10.1			21.9
Asia Pacific		26.4			6.5			19.9
Total		28.7	%		3.5	%		25.2	%
Product Categories
Knees
Americas		26.8	%		0.5	%		26.3	%
EMEA		28.4			9.4			19.0
Asia Pacific		29.0			8.0			21.0
Total		27.5			3.8			23.7
Hips
Americas		22.4			0.5			21.9
EMEA		26.3			9.2			17.1
Asia Pacific		12.0			4.4			7.6
Total		20.9			3.5			17.4
S.E.T		30.6			3.5			27.1
Dental, Spine & CMFT		37.1			3.0			34.1
Other		42.9			3.7			39.2
Total		28.7	%		3.5	%		25.2	%

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF REPORTED NET SALES % CHANGE TO CONSTANT CURRENCY % CHANGE (unaudited)


	For the Three Months Ended
	June 30,
								Foreign			Constant
	Net Sales							Exchange			Currency
	2021		2019		% Change			Impact			% Change
Geographic Results
Americas	$	1,239.6	$	1,214.3		2.1	%		0.2	%		1.9	%
EMEA		429.8		438.0		(1.9)			5.4			(7.3)
Asia Pacific		357.5		336.3		6.3			3.5			2.8
Total	$	2,026.9	$	1,988.6		1.9	%		1.9	%		–	%
Product Categories
Knees	$	665.6	$	696.7		(4.5)			1.8			(6.3)
Hips		474.6		478.5		(0.8)			2.0			(2.8)
S.E.T		462.1		408.7		13.1			2.3			10.8
Dental & Spine		263.5		257.6		2.3			1.5			0.8
Other		161.1		147.1		9.5			2.0			7.5
Total	$	2,026.9	$	1,988.6		1.9	%		1.9	%		–	%

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2021 and 2020
(in millions, except per share amounts, unaudited)


FOR THE THREE MONTHS ENDED JUNE 30, 2021
	Cost of products sold, excluding intangible asset amortization		Intangible asset amortization		Research and development		Selling, general and administrative		Goodwill and intangible asset impairment		Restructuring and other cost reduction initiatives		Quality remediation		Acquisition, integration, divestiture and related		Other income, net		Provision (benefit) for income taxes		Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.		Diluted earnings (loss) per common share
As Reported	$	581.6	$	154.6	$	180.5	$	817.4	$	16.3	$	19.6	$	11.0	$	25.4	$	8.1	$	31.4	$	141.9	$	0.67
Inventory and manufacturing-related charges⁽¹⁾		(7.9)		–		–		–		–		–		–		–		–		4.6		3.3		0.02
Intangible asset amortization⁽²⁾		–		(154.6)		–		–		–		–		–		–		–		31.4		123.2		0.58
Goodwill and intangible asset impairment⁽³⁾		–		–		–		–		(16.3)		–		–		–		–		2.1		14.2		0.07
Restructuring and other cost reduction initiatives⁽⁴⁾		(0.1)		–		–		–		–		(19.6)		–		–		–		4.4		15.3		0.07
Quality remediation⁽⁵⁾		–		–		–		–		–		–		(11.0)		–		–		2.5		8.5		0.04
Acquisition, integration, divestiture and related⁽⁶⁾		–		–		–		–		–		–		–		(25.4)		–		5.3		20.1		0.10
Litigation⁽⁷⁾		–		–		–		(3.6)		–		–		–		–		–		0.4		3.2		0.02
European Union Medical Device Regulation⁽⁸⁾		–		–		(10.6)		–		–		–		–		–		–		2.4		8.2		0.04
Certain R&D agreements⁽⁹⁾		–		–		(65.0)		–		–		–		–		–		–		14.6		50.4		0.24
Other charges⁽¹⁰⁾		–		–		–		4.5		–		–		–		–		(3.0)		(2.1)		(5.4)		(0.03)
Swiss tax reform⁽¹¹⁾		–		–		–		–		–		–		–		–		–		(15.4)		15.4		0.07
Other certain tax adjustments⁽¹²⁾		–		–		–		–		–		–		–		–		–		(2.2)		2.2		0.01
As Adjusted	$	573.6	$	–	$	104.9	$	818.3	$	–	$	–	$	–	$	–	$	5.1	$	79.4	$	400.5	$	1.90

FOR THE THREE MONTHS ENDED JUNE 30, 2020

Cost of products sold, excluding intangible asset amortization

Intangible asset amortization

Research and development

Selling, general and administrative

Goodwill and intangible asset impairment

Restructuring and other cost reduction initiatives

Quality remediation

Acquisition, integration, divestiture and related

Other income, net

Provision (benefit) for income taxes

Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.

Diluted earnings (loss) per common share

As Reported

424.5

147.7

87.7

665.0

33.0

28.0

9.7

2.2

3.8

(13.7)

(206.6)

(1.00)

Inventory and manufacturing-related charges⁽¹⁾

(1.4)

–

3.7

(2.3)

(0.01)

Intangible asset amortization⁽²⁾

–

(147.7)

–

8.1

139.6

0.68

Goodwill and intangible asset impairment⁽³⁾

–

(33.0)

–

5.7

27.3

0.13

Restructuring and other cost reduction initiatives⁽⁴⁾

–

(28.0)

–

0.8

27.2

0.13

Quality remediation⁽⁵⁾

(0.2)

–

(9.7)

–

0.6

9.3

0.04

Acquisition, integration, divestiture and related⁽⁶⁾

–

(2.2)

–

0.1

2.1

0.01

Litigation⁽⁷⁾

–

(1.3)

–

(6.1)

7.4

0.04

European Union Medical Device Regulation⁽⁸⁾

–

(6.1)

–

(0.1)

6.2

0.03

Other charges⁽¹⁰⁾

–

(11.9)

–

(4.6)

10.7

(3.4)

(0.02)

Swiss tax reform⁽¹¹⁾

–

0.7

(0.7)

–

Other certain tax adjustments⁽¹²⁾

–

(4.1)

4.1

0.02

Effect of dilutive shares assuming net earnings⁽¹³⁾

–

As Adjusted

422.9

–

81.6

651.8

–

(0.8)

6.4

10.2

0.05

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 and 2020
(in millions, except per share amounts, unaudited)

FOR THE SIX MONTHS ENDED JUNE 30, 2021
	Cost of products sold, excluding intangible asset amortization		Intangible asset amortization		Research and development		Selling, general and administrative		Goodwill and intangible asset impairment		Restructuring and other cost reduction initiatives		Quality remediation		Acquisition, integration, divestiture and related		Other income, net		Provision (benefit) for income taxes		Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.		Diluted earnings (loss) per common share
As Reported	$	1,098.0	$	310.1	$	274.9	$	1,587.5	$	16.3	$	41.4	$	21.2	$	38.8	$	15.4	$	54.3	$	340.0	$	1.62
Inventory and manufacturing-related charges⁽¹⁾		(2.0)		–		–		–		–		–		–		–		–		10.5		(8.5)		(0.04)
Intangible asset amortization⁽²⁾		–		(310.1)		–		–		–		–		–		–		–		61.2		248.9		1.18
Goodwill and intangible asset impairment⁽³⁾		–		–		–		–		(16.3)		–		–		–		–		2.1		14.2		0.07
Restructuring and other cost reduction initiatives⁽⁴⁾		(0.2)		–		–		–		–		(41.4)		–		–		–		9.3		32.3		0.15
Quality remediation⁽⁵⁾		–		–		–		–		–		–		(21.2)		–		–		4.7		16.5		0.08
Acquisition, integration, divestiture and related⁽⁶⁾		–		–		–		–		–		–		–		(38.8)		–		8.3		30.5		0.14
Litigation⁽⁷⁾		–		–		–		(9.7)		–		–		–		–		–		0.9		8.8		0.04
European Union Medical Device Regulation⁽⁸⁾		–		–		(17.5)		–		–		–		–		–		–		3.8		13.7		0.07
Certain R&D agreements⁽⁹⁾		–		–		(65.0)		–		–		–		–		–		–		14.6		50.4		0.24
Other charges⁽¹⁰⁾		–		–		–		1.9		–		–		–		–		(7.1)		(2.8)		(6.2)		(0.03)
Swiss tax reform⁽¹¹⁾		–		–		–		–		–		–		–		–		–		(18.8)		18.8		0.09
Other certain tax adjustments⁽¹²⁾		–		–		–		–		–		–		–		–		–		(0.2)		0.2		–
As Adjusted	$	1,095.8	$	–	$	192.4	$	1,579.7	$	–	$	–	$	–	$	–	$	8.3	$	147.9	$	759.6	$	3.61

FOR THE SIX MONTHS ENDED JUNE 30, 2020
	Cost of products sold, excluding intangible asset amortization		Intangible asset amortization		Research and development		Selling, general and administrative		Goodwill and intangible asset impairment		Restructuring and other cost reduction initiatives		Quality remediation		Acquisition, integration, divestiture and related		Other income, net		Provision (benefit) for income taxes		Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.		Diluted earnings (loss) per common share
As Reported	$	911.6	$	295.3	$	186.1	$	1,493.9	$	645.0	$	73.0	$	26.1	$	6.6	$	6.8	$	(8.5)	$	(715.1)	$	(3.46)
Inventory and manufacturing-related charges⁽¹⁾		(2.0)		–		–		–		–		–		–		–		–		5.9		(3.9)		(0.02)
Intangible asset amortization⁽²⁾		–		(295.3)		–		–		–		–		–		–		–		38.2		257.1		1.24
Goodwill and intangible asset impairment⁽³⁾		–		–		–		–		(645.0)		–		–		–		–		5.7		639.3		3.09
Restructuring and other cost reduction initiatives⁽⁴⁾		–		–		–		–		–		(73.0)		–		–		–		12.2		60.8		0.29
Quality remediation⁽⁵⁾		0.3		–				–		–		–		(26.1)		–		–		4.1		21.7		0.11
Acquisition, integration, divestiture and related⁽⁶⁾		–		–		–		–		–		–		–		(6.6)		–		1.0		5.6		0.03
Litigation⁽⁷⁾		–		–		–		(81.1)		–		–		–		–		–		11.9		69.2		0.34
European Union Medical Device Regulation⁽⁸⁾		–		–		(17.1)		–		–		–		–		–		–		2.1		15.0		0.07
Other charges⁽¹⁰⁾		–		–		–		(17.8)		–		–		–		–		(3.9)		12.6		1.3		0.01
Swiss tax reform⁽¹¹⁾		–		–		–		–		–		–		–		–		–		(16.2)		16.2		0.08
Other certain tax adjustments⁽¹²⁾		–		–		–		–		–		–		–		–		–		3.1		(3.1)		(0.02)
Effect of dilutive shares assuming net earnings⁽¹³⁾		–		–		–		–		–		–		–		–		–		–		–		(0.01)
As Adjusted	$	909.9	$	–	$	169.0	$	1,395.0	$	–	$	–	$	–	$	–	$	2.9	$	72.1	$	364.1	$	1.75

⁽¹⁾	Inventory and manufacturing-related charges include excess and obsolete inventory charges on certain product lines we intend to discontinue, incremental cost of products sold from stepping up inventory to its fair value from its manufactured cost in business combination accounting and other inventory and manufacturing-related charges or gains.

⁽²⁾	We exclude intangible asset amortization from our non-GAAP financial measures because we internally assess our performance against our peers without this amortization. Due to various levels of acquisitions among our peers, intangible asset amortization can vary significantly from company to company.

⁽³⁾	In the first quarter of 2020, we recognized goodwill impairment charges of $470.0 million and $142.0 million related to our EMEA and Dental reporting units, respectively. In the second quarters of 2021 and 2020, we recognized $16.3 million and $33.0 million, respectively, of in-process research and development (“IPR&D”) intangible asset impairments on certain IPR&D projects.

⁽⁴⁾	In December 2019, our Board of Directors approved, and we initiated, a new global restructuring program that includes a reorganization of key businesses and an overall effort to reduce costs in order to accelerate decision-making and focus the organization on priorities to drive growth. Restructuring and other cost reduction initiatives also include other cost reduction initiatives that have the goal of reducing costs across the organization.

⁽⁵⁾	We are addressing inspectional observations on Form 483 and a Warning Letter issued by the U.S. Food and Drug Administration (“FDA”) following its previous inspections of our Warsaw North Campus facility, among other matters. This quality remediation has required us to devote significant financial resources and is for a discrete period of time. The majority of the expenses are related to consultants who are helping us to update previous documents and redesign certain processes.

⁽⁶⁾	The acquisition, integration, divestiture and related gains and expenses we have excluded from our non-GAAP financial measures resulted from the planned spinoff of NewCo and various acquisitions.

⁽⁷⁾	We are involved in routine patent litigation, product liability litigation, commercial litigation and other various litigation matters. We review litigation matters from both a qualitative and quantitative perspective to determine if excluding the losses or gains will provide our investors with useful incremental information. Litigation matters can vary in their characteristics, frequency and significance to our operating results. The litigation charges and gains excluded from our non-GAAP financial measures in the periods presented relate to product liability matters where we have received numerous claims on specific products, patent litigation and commercial litigation related to a common matter in multiple jurisdictions. In regards to the product liability matters, due to the complexities involved and claims filed in multiple districts, the expenses associated with these matters are significant to our operating results. Once the litigation matter has been excluded from our non-GAAP financial measures in a particular period, any additional expenses or gains from changes in estimates are also excluded, even if they are not significant, to ensure consistency in our non-GAAP financial measures from period-to-period.

⁽⁸⁾	The European Union Medical Device Regulation imposes significant additional premarket and postmarket requirements. The new regulations provided a transition period until May 2021 for currently-approved medical devices to meet the additional requirements. For certain devices, this transition period can be extended until May 2024. We are excluding from our non-GAAP financial measures the incremental costs incurred to establish initial compliance with the regulations related to our currently-approved medical devices. The incremental costs primarily include third-party consulting necessary to supplement our internal resources.

⁽⁹⁾	During the three and six-month periods ended June 30, 2021, we entered into certain agreements to gain access to or acquire third-party IPR&D projects.

⁽¹⁰⁾	We have incurred other various expenses from specific events or projects that we consider highly variable or that have a significant impact to our operating results that we have excluded from our non-GAAP measures. These include costs related to legal entity, distribution and manufacturing optimization, including contract terminations, gains and losses from changes in fair value on our equity investments, as well as, in the 2020 period, our costs of complying with a Deferred Prosecution Agreement (“DPA”) with the U.S. government related to certain Foreign Corrupt Practices Act matters involving Biomet and certain of its subsidiaries, which DPA concluded in February 2021.

⁽¹¹⁾	We recognized a tax benefit related to Switzerland’s Federal Act on Tax Reform and AHV Financing (“TRAF”) in addition to an impact from certain restructuring transactions in Switzerland. Also included are tax adjustments relating to ongoing impacts of tax only amortization resulting from TRAF as well as certain restructuring transactions in Switzerland.

⁽¹²⁾	Other certain tax adjustments relate to various discrete tax period adjustments.

⁽¹³⁾	Due to the reported net loss for this period, the effect of dilutive shares assuming net earnings is shown as an adjustment. Diluted share count used in Adjusted Diluted EPS is:

	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020

Diluted shares		206.8		206.6
Dilutive shares assuming net earnings		1.0		1.4
Adjusted diluted shares		207.8		208.0

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net cash provided by (used in) operating activities	$	453.9	$	(52.8)	$	700.4	$	398.1
Additions to instruments		(67.9)		(73.6)		(150.5)		(159.3)
Additions to other property, plant and equipment		(27.3)		(19.0)		(54.7)		(59.2)
Free cash flow	$	358.7	$	(145.4)	$	495.2	$	179.6

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF GROSS PROFIT & MARGIN TO ADJUSTED GROSS PROFIT & MARGIN FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net Sales	$	2,026.9		$	1,226.1		$	3,874.3		$	3,009.9
Cost of products sold, excluding intangible asset amortization		581.6			424.5			1,098.0			911.6
Intangible asset amortization		154.6			147.7			310.1			295.3
Gross Profit	$	1,290.7		$	653.9		$	2,466.2		$	1,803.0

Inventory and manufacturing-related charges		7.9			1.4			2.0			2.0
Restructuring and other cost reduction initiatives		0.1			–			0.2			–
Quality remediation		–			0.2			–			(0.3)
Intangible asset amortization		154.6			147.7			310.1			295.3
Adjusted gross profit	$	1,453.3		$	803.2		$	2,778.5		$	2,100.0


Gross margin		63.7	%		53.3	%		63.6	%		59.9	%
Inventory and manufacturing-related charges		0.4			0.1			0.1			0.1
Restructuring and other cost reduction initiatives		–			–			–			–
Quality remediation		–			–			–			–
Intangible asset amortization		7.6			12.1			8.0			9.8

Adjusted gross margin		71.7	%		65.5	%		71.7	%		69.8	%

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF OPERATING PROFIT (LOSS) & MARGIN TO ADJUSTED OPERATING PROFIT & MARGIN FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 and 2020 (in millions, unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Operating profit (loss)	$	220.5		$	(171.7)		$	486.1		$	(627.7)
Inventory and manufacturing-related charges		7.9			1.4			2.0			2.0
Intangible asset amortization		154.6			147.7			310.1			295.3
Goodwill and intangible asset impairment		16.3			33.0			16.3			645.0
Restructuring and other cost reduction initiatives		19.7			28.0			41.6			73.0
Quality remediation		11.0			9.9			21.2			25.8
Acquisition, integration, divestiture and related		25.4			2.2			38.8			6.6
Litigation		3.6			1.3			9.7			81.1
European Union Medical Device Regulation		10.6			6.1			17.5			17.1
Certain R&D agreements		65.0			–			65.0			–
Other charges		(4.5)			11.9			(1.9)			17.8
Adjusted operating profit	$	530.1		$	69.8		$	1,006.4		$	536.0


Operating profit (loss) margin		10.9	%		(14.0)	%		12.6	%		(20.9)	%
Inventory and manufacturing-related charges		0.4			0.1			0.1			0.1
Intangible asset amortization		7.6			12.1			8.0			9.8
Goodwill and intangible asset impairment		0.8			2.7			0.4			21.4
Restructuring and other cost reduction initiatives		1.0			2.3			1.1			2.4
Quality remediation		0.5			0.8			0.5			0.9
Acquisition, integration, divestiture and related		1.3			0.2			1.0			0.2
Litigation		0.2			0.1			0.2			2.7
European Union Medical Device Regulation		0.5			0.5			0.5			0.6
Certain R&D agreements		3.2			–			1.7			–
Other charges		(0.2)			0.9			(0.1)			0.6
Adjusted operating profit margin		26.2	%		5.7	%		26.0	%		17.8	%

ZIMMER BIOMET HOLDINGS, INC. RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 and 2020 (unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Effective tax rate		18.0	%		6.2	%		13.8	%		1.2	%
Tax effect of adjustments made to earnings before taxes⁽¹⁾		8.7			35.0			7.2			13.5
Swiss tax reform		(8.9)			(0.3)			(4.7)			2.3
Other certain tax adjustments		(1.3)			1.9			–			(0.4)
Adjusted effective tax rate		16.5	%		42.8	%		16.3	%		16.6	%

⁽¹⁾ Includes inventory and manufacturing-related charges; intangible asset amortization; goodwill impairment; restructuring and other cost reduction initiatives; quality remediation; acquisition, integration, divestiture and related; litigation; European Union Medical Device Regulation; certain R&D agreements, and other charges

ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF DEBT TO NET DEBT
AS OF JUNE 30, 2021 and DECEMBER 31, 2020
(in millions, unaudited)


	June 30, 2021		December 31, 2020
Debt, both current and long-term	$	7,852.5	$	8,126.5
Cash and cash equivalents		(1,042.4)		(802.1)
Net debt	$	6,810.1	$	7,324.4

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SOURCE Zimmer Biomet Holdings, Inc.

August 3, 2021 6:33 am

Walker & Dunlop Releases Proprietary Data and Insights on Build-for-Rent Housing Market in Latest Whitepaper

PR Newswire

BETHESDA, Md., Aug. 3, 2021 /PRNewswire/ — Walker & Dunlop, Inc. announced today that it has released one of the most comprehensive Build-For Rent (BFR) reports to date. BFR has become one of the strongest asset classes in commercial real estate, presenting many opportunities to lenders, builders, and developers. As with any new product, this rapidly growing market segment has drawn both enthusiasm and misconceptions.

The second edition of the BFR Whitepaper is backed by the latest data from Zelman & Associates, the leading housing research firm in the country. In this report, we provide a wide-ranging analysis of the increasingly popular sub-asset class of single-family rental (SFR), explain the nuances of this type of development, and address some common myths. The report includes:

Case studies providing real-world examples of how these transactions are getting done, including a $200 million programmatic joint venture and a $51 million capital stack for a BFR acquisition
Up-to-date data on collections, occupancy, and rent growth
Insights on construction dynamics within the BFR space
A discussion of financing options available for this asset class, including terms we’re seeing from the Fannie Mae, Freddie Mac, banks, debt funds, bridge lending programs, and more

To learn more about BFR, the asset class that is on pace to grow faster than office, retail, self-storage, and hospitality, download the full report here: https://explore.walkerdunlop.com/financing-your-build-for-rent-vision-pr

Our BFR & SFR Practice Group comprises 12 experts strategically positioned across the business to finance and sell these specialty communities. Our national team provides expert guidance on property sales, debt origination, and the structuring of equity to generate optimal returns and strategic relationships for our clients. The team is active with over fifty groups in the space, which range from institutional clients, homebuilders, multifamily developers, and individual investors. With an active pipeline of over $1.9 billion on transaction volume, the team has extensive experience executing on lending, capital brokerage, or investment sales opportunities. For more information on our Build-for-Rent practice group or to connect with an expert, visit our website.

About Walker & Dunlop

Walker & Dunlop (NYSE: WD) is the largest provider of capital to the multifamily industry in the United States and the fourth largest lender on all commercial real estate including industrial, office, retail, and hospitality. Walker & Dunlop enables real estate owners and operators to bring their visions of communities — where Americans live, work, shop and play — to life. The power of our people, premier brand, and industry-leading technology make us more insightful and valuable to our clients, providing an unmatched experience every step of the way. With over 1,100 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune‘s Great Places to Work^® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.

View original content to download multimedia:https://www.prnewswire.com/news-releases/walker–dunlop-releases-proprietary-data-and-insights-on-build-for-rent-housing-market-in-latest-whitepaper-301346499.html

SOURCE Walker & Dunlop, Inc.